Q2 2021 Helix Energy Solutions Group Inc Earnings Call
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Greetings and welcome to the Helix Energy solutions second quarter 2021 earnings conference call during.
During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct.
The question and answer session at that time, if you would like to register for a question. Please press. The 1 followed by the for on your telephone if you require operator assistance. Please press star zero.
As a reminder of this conference is being recorded Tuesday July 27th 2021.
It is now my pleasure to turn the conference over to Eric Scaffold.
<unk>, Vice President and Chief Financial Officer, with Helix Energy solutions. Please go ahead Sir.
Good morning, everyone and thanks for joining us today on our conference call for our second quarter 2021 earnings release participating on this call.
Call for helix and they are Owen kratz, our CEO Scotty Sparks, our COO, Ken Neikirk, our general counsel and myself and hopefully.
<unk> had an opportunity to re.
Please and the related slide presentation released last night, if you do not have a copy of these materials both can be accessed through the for.
And for the Investor page on our website at Www Dot helix ESG Dot com. The press release can be accessed under the press releases tab and the slide presentation can be accessed by clicking on todays webcast icon before we begin our prepared remarks, Ken Neikirk will make a statement regarding forward looking information.
Kim.
During this conference call, we anticipate making certain projections and forward looking statements based on our current expectations. All statements. In this conference call are 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 1995 of our actuals.
Actual results may differ materially from our projections and forward looking statements due to a number and variety of factors, including those set forth in slide 2 and our most recently filed annual report on form 10-K, and and our other filings with the SEC.
Also during this call of certain non-GAAP financial disclosures may be made in accordance with the SEC rules.
Actual 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 the replay of this broadcast are available under the for the Investor page of our website at Www Dot helix ESG and Dot Com Owen.
Good morning.
Well, we hope everyone out there and the families are doing well and healthy and staying safe.
This morning, we will review, our Q2 and year to date performance our operations our view of the current market dynamics and provide our outlook for the balance of 2021.
Moving to the presentation slides 5 through 7 and provide a high level summary.
Some of our results.
The performance for the quarter and year to day continues to be in line with expectations as our teams continue to execute at high levels of up the ability.
The Q 7000 continued successful operations in West Africa, North Sea intervention activity increased in tandem with.
Good weather season, the well.
Enhancer achieved good utilization the Seawell was activated late Q2 for brief project Gulf.
The Gulf of Mexico intervention, and while generally soft exited the quarter with both vessels working and.
And Brazil, both vessels worked the entire quarter robotics benefited from the good weather season.
And with increased activity and trenching and site clearance work.
Production facilities benefited from the new H WCG agreement for response services during the quarter, we completed production enhancement efforts on the Droshky field, where the expected benefit and the second half of the year our.
Our results for the second quarter.
21 were slightly down compared to our results for the first quarter.
The 2021.
Excuse me revenues were reported at $162 million with the net loss of $14 million and EBITDA of $25 million or gross profit was 3 million.
For a 22%.
Okay.
On slide 8.
From a balance sheet perspective, our cash balance at the end of the quarter was $244 million with an additional $71 million and temporarily restricted cash associated with the short term LC for our work and West Africa.
During the second quarter, we generated $53 million of operating cash flows and spent $5 million on capex with the resulting free cash flow of $47 million.
Year to date, we've generated 93 million of operating cash flow and $86 million of free cash flow our net debt at the end of the quarter was 20.
And our net debt to book capital was 1% I'll now turn the call over to Scotty for an in depth discussion of our operating results.
Thanks, Ron and good morning, everyone moving on to slide 10.
We continue to operate and all of our business lines for challenge and yet with the ongoing kind of Covid.
The 1 in pandemic life onshore and offshore of teams and partners and doing an incredible job and continuously adapt to situations and I presented.
We have now reopened and the office total staff and how Houston headquarters and support base and their offices and facilities and Aberdeen, Scotland the <unk>.
The measures and protocols have been putting in place that are designed to allow safe access to work in the.
And <unk>.
Our office is still remain closed and Rio and the Singapore and the teams and those locations effectively working remotely.
The COVID-19 pandemic still presents many logistical challenges, including travel restrictions crunchings testing and screening personnel over 18000 times to date and the continued to successfully transfer personnel.
Personnel to off to our websites globally.
Test and is more easily available and the vaccine rollout as I did and the situations and in certain locations from traveling quarantine restrictions of being east or removed.
And the second quarter, and we continue to operating 11 vessels globally with minimal operational disruption and despite the logistical challenges.
Considering the oil price and the high standards with 98% 90.
98, 5% uptime and efficiency.
Cash and help reduce some of our best safety statistics since our records Mccan concluded in the quarter and match and our lowest total recordable incident rates, emphasizing our strong supportive safety culture and leadership.
Over to slide 11.
And during the second quarter, we produced revenues of $162 million, resulting in a gross profit margin of 2% producing the gross profits of free milling.
Producing compared to 163 million revenue from $15 million of gross profit and the first quarter producing EBITDA for the second quarter of 25 million.
Second quarter of the way intervention fleet achieved utilization of 72% globally with 100% utilization in Brazil, and 58% for utilization in the Gulf of Mexico, and 63% utilization and the North Sea and West Africa.
And the robotics chartered vessel fleet achieved 93% globally.
And also of Mexico, we have buy for the Q4.2000, and the key 5000 work and and operational with some schedule of gaps between projects.
And the North sea and the well enhancer was operational for most of the quarter and the Seawell was activated so on the take a brief project price of incentives for warm stack mode.
And the West Africa region, and the Q 7 well.
And Nigeria for.
And the guidance undertaking production enhancement works with strong operational uptime.
Operating performance and Brazil was that the usual high standards of both vessels achieved high utilization of 100% undertaken abandonment activity.
The robotics chartered vessel fleet achieved high utilization and the quarter working between RV.
Support trenching and renewable works globally, completing 260.236 days with 157 days of work undertaken and renewable related green projects.
Slide 12 provides a more detailed review of our operations for our well intervention business and the Gulf of Mexico. The <unk>.
<unk> had 72%.
Utilization continuing under the contract for BP until mid April then undertaken of production enhancement and scope of our droshky well the.
And the vessel completed 2 construction support scopes and commenced the production enhancement scopes for another clients and the quarter with some schedule of gaps between projects.
The key for thousands had 45%.
Utilization and care and idle time between the projects completing construction and support work for 1 clients performed the production enhancement scopes and ultra deepwater for another clients and then mobilized for a 2 well campaign for another client.
Both key vessels have an integrated helix Schlumberger airline single point contract mechanism, allowing for easy of contracting for our clients.
With both teams integrated and working very well as 1 complete team.
Pleasingly, both vessels have contracted work and Q3 with some gaps between projects with.
We've contracted and awarded works and Q4 and visibility for potential activity further activity in Q4 and into 2022.
Moving to slide 13.
Well see well intervention business continues to be most affected by reduced work opportunities related to COVID-19 for the extended lockdown and the United Kingdom, leading for the continued warm stacking of the seawell.
The well enhancer had a good quarter and achieved 83% utilization in Q2 work and for 2 clients in the quarter, including completing the full production of <unk>.
And the scope for the 1 clients followed by 1 production enhancement and the scope for the other clients.
And the vessel is contracted to work into the key free and has visibility of potential further works.
The Seawell remained warm stack and leach Scott, we've significantly reduced costs and reduce crews for the rest of the quarter.
The vessel was activated for a short period of undertaken.
Hence between the punishment work on free wells for 1 client and then returning to warm stack mode.
The vessel currently has contracts with work with free clients commenced in early August scheduled until the end of Q free.
The Q 7000, and had a strong performing quarter and Q T. The vessel performed extremely well and working with the multinational integrated helix from Jerry lineups.
And of protect the vessel works on free wells and the quarter for 2 clients and now has contracted work and Nigeria into Q4 with potential further works identified.
Moving onto slide 14.
And Brazil by vessels achieved strong utilization and the second quarter the.
The Siem helix, 1 had 100% utilization in Q2 and completed.
And fleets of the abandonment work on 4 wells.
Although we remain in discussions with Petrobras regarding the Siem helix 1 the current schedule for work the.
Current schedule has work complete and in mid August of <unk>.
This is and pursuing other works for the vessel and Brazil and other markets internationally.
The Siem helix 2 have 100% utilize.
The team inflation and completed the abandonment work on free well for the quarter.
And our discussions regarding the Siem helix, 1 will inform the approach and the outlook for the Siem helix, 2 which is on the contracts into December.
Moving onto slide 15 for our robotic surgery.
Robotics had another good quarter and as I have and another good year and 2021 operating.
And free vessels during the quarter, primarily work and non oil and gas and renewables related projects.
And the APAC region, and the Grand Canyon, II had 100% utilization and QC performing works on our renewable energy projects and Taiwan.
The rest of this now contracted and Thailand undertaken of decommissioning project.
That is expected to continue for the most of 2021.
Utilizing.
And the North Sea the Grand Canyon free was utilized 93% undertaken renewables trenching for 2 clients.
The vessel has contracted the oil and gas and renewable trenching scopes huge the life and the vessels for most of the 2021.
The chartered vessel South for continued site clearance and the semi works for 61 days on the wind farm.
Project the South of has now been replaced by another vessel of the vast suites, which should continue work on the projects that is now expected to last into Q4.
And the Gulf of Mexico, RV activity remains strong and we continue to market the share of the board of loans as our payers. We go vessels going forward this year.
We've now commenced mobilization of.
The further spot vessel the same the Roderick and are contracted on the cable installation projects and our first work offshore Guyana.
The Robotics group continues its transition further integrating the renewable sector and a new clients and more services. We've recently been contracted to undertake a further site clearance and survey project and recently been awarded another <unk> clearing.
Hearings and destination and scope.
Both projects are slated to commence in 2021, we have also recently been awarded of further significant in size, but renewable trenching works and 2022 and 2020 free.
Over to slide 16, and I'll leave this slide detail and the vessels already entrenched and utilization for your reference.
For our 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 continuing to evolve and doing a fantastic job under these challenging circumstances.
And is also great to see our personnel returned and have our teams here back working and the office tackling these challenges and this market face to face revenue screens of.
Screen, Thanks, Scott and good morning, moving to slide 18, and outlines our debt instrument and the maturity profile at June 30.
Total funded debt is $346 million at the end of Q2, we had $32 million of scheduled principal payments and the second half of the year moving on to Slide 19. This provides an update.
Key balance sheet metrics, including long term debt and net debt levels at year end and June 30.
With $350 million of cash and restricted cash as of June 30, our net debt approximated $21 million at the end of the quarter, our long term debt balance and net debt balance at June 30, and reflect the early adoption of the ASU 2000.
Great.
<unk> with simplified and for treatment of our convertible notes.
Our cash position at the end of Q2 was $244 million with an additional $71 million of restricted cash that supports of temporary project ELC or quarter and net debt to book capitalization was 1%.
Totally and the slides 20 through 24.
We continue to operating in a challenging market our customers continue to be cautious and committing to spending in 2021. The current relatively stable macro backdrop has increased customer dialogue and interest but has been slow to develop into firm orders the <unk>.
Positive developments globally.
And within our sector are providing and positive foundation for recovery and our markets book, primarily beyond 2021, we.
We have made flight updates to our Q1 guidance our guidance is the good faith attempt to provide investors information.
Appropriately caveat it as best we can against the backdrop of the current environment.
Our guidance for 2021 is as follows revenues and the $600 million to $670 million range EBITDA of $75 million to $100 million free cash flow of $45 to $90 million.
Our EBITDA outlook is based on the following beyond Q2, we anticipate working 6 well intervention vessels and the spot market.
Visibility is currently limited, we expect visibility and utilization will be on a quarter to quarter basis.
And the Gulf of Mexico, well intervention business, both vessels will likely be and the spot market for the remainder of the year with the expected gaps and projects between projects. We generally expect lower levels of activity in 2021 compared to 2000.
And the North sea well intervention business, we expect both vessels to be working and the third quarter with expected gaps and their schedules work will likely taper off during the winter months.
And in Brazil, the Siem helix shoes on contracting to December the Siem helix, 1 expected to completed extension period and August beyond that its outlook.
And is uncertain.
And the West Africa, we expect to work for Q 7000 into Q4 with possibilities thereafter.
The robotics may benefit from the active several months in the North Sea overall robotics may have a weaker years compared with 2020 with less site clearance work, but overall continues to be of steady performer.
<unk> production facilities should benefit from the Droshky production and our agreement with the H WCG.
We have made slight increases to the upper range of our cash flow forecast, our free cash flow outlook and supported by the strong year to date cash generation and highlights both the challenges and the range of possibilities during the second half of the year.
Year the range provide acknowledges the expected range of our second half EBITDA and the range of our annual capital spending of $20 to $35 million. The range also accounts for a potential delay.
And the remaining of approximately $12 million of cares Act tax refund.
Working capital is assumed to be flat.
For the year and anticipation of working capital requirements to support 2022 activity.
Providing a bit more color to our key assumptions by segment and region on slide 23, first with our well intervention segment Gulf of Mexico. The Q 5 and Q4, both have contracted and work in the third and fourth quarters.
We are targeting additional opportunities, but do expect gaps and their schedules and.
And the UK, North Sea and the World Hampshire, and see well have contracted work into Q3 the.
The Q 7000 commenced operations in late January with contracted work and West Africa expected to last into Q4.
And Brazil the CME.
<unk> and contract December of the Siem Helix..1 is expected to complete this extension and August beyond that outlook is uncertain and the vessel is expected to be out of service and unavailable with the scheduled drydock schedule of approximately.
The 40 days.
Between Q3 and Q4.
Moving to our robotics segment slide 20 for robotics second half of the year is expected to be stronger than the first half of the year. The Grand Canyon II and APAC is on contract and Taiwan into Q4 and is expected to have strong utilization for the balance of 'twenty 2021 and that region for.
Grand Canyon, III is contracted to be performing trenching and the north sea.
With the expected strong utilization into Q4 the.
The follow on wind.
Windfarm survey and site clearance work began at the end of Q1 with additional and has additional recent awards.
Moving to production facilities. The HP 1 is on contract with no expected change.
And in Q2, the new <unk>.
And the agreement became effective we also expect to benefit from Droshky production enhancement.
Continuing to slide 25, our capex forecast range of $20 million to $35 million. The majority of our Capex forecast as maintenance and project related and it also includes the production enhancement opportunities at Droshky complete.
<unk> in April.
Reviewing our balance sheet, our funded debt decreased to 340 and with an additional $32 million decrease expected during the balance of 2021 as a result of scheduled principal payments our cash position at the end of Q2 was $244 million. Once again. This does not include 70.
$71 million of restricted cash that supports the temporary project LLC.
We received 7 million tax refund in Q1 and anticipate the additional $12 million of cares Act refund over the next 12 months as a result of tax changes.
I'll Skip slide 27 and leave it for your reference.
At this time.
And I'll turn the call back tailwind for his closing comments.
Sure.
First let me start with some comments on the market in general and then I'll touch on some early observations about 2022 and finished with the helix outlook for the second half of 2021 and some comments.
We were expecting 2020.
1 to be another challenging year and it's.
And it has not proven us wrong.
Characterized it as the market and the early stages of and economic recovery.
And for whatever the reasons from virtual fatigue from producers working at home as a result of Covid response to reallocation of capital to renewables or the threat of OPEC and production.
The increases.
The volume of work in 2021 has only increased marginally over 2020.
Almost every asset class continues to be and meaningful oversupply and consolidations, while beginning of not had a meaningful impact here.
Helix vessel services have always been compared with rig day rates and.
And that continues to be the case and the current environment more than ever we need to demonstrate our value proposition the.
And the rig market is getting tighter and this is starting to drive work our way however, rig contracts and are typically short 1 or 2 well spot contracts, leaving short gaps and the rig schedules as opposed to larger.
Between longer contracts. This leaves the rigs and operating mode. Some rig operators are taking on the intervention work to fill the short gaps at a lose less kind of rate versus laying up.
And we missed this phenomena of identifying it earlier and the year and price to a tighter market this cost of several.
The significant awards.
As always we look for lessons learned and we have made adjustments since then.
At present or are at present about 60% of our world work is the intervention for production enhancement and 40% P&A.
For decades, PMA expectations of exceeded reality.
GAAP and Theres always seems to be away for producers to defer the zero revenue work.
And it is early but we're seeing the regulators and the Gulf of Mexico become less willing to grant deferment.
And the North Sea, we're seeing of public push for abandonment of the field to occur even if theres a little push from regulators.
<unk> this is especially true of the new operators.
And Australia of the fields are becoming very mature after significant bankruptcy debt resulted in an abandonment liability going to the government. There is mounting pressure to increase abandonment activity. These are observations, highlighting the regulatory and environmental and social trends.
And that are prevalent and our market and are clear indicators of significant opportunities our services and capabilities are well positioned for when the work is no longer deferred.
We did expect to see a marked increase in production of effort.
<unk> and enhancement efforts this year well.
Well theres been a slight tick and plenty.
Plenty of talk for whatever reason of meaningful increases yet to occur and the Gulf of Mexico, We had little visibility for work at the start of the year fairly recently there are last minute works being requested and planned we're seeing a meaningful increase of work being planned or at least discussed for 2022.
We're anticipating a stronger 2 vessel market and the Gulf of Mexico for 2022.
The North Sea historically has been the first region to decline and the downturn and the first to recover.
This cycle has been an exception actual work and visibility on future work for production enhancement has been lacking we believe there is meaningful.
Buildup of needed work, but so far of little has actually being engineered however, we do anticipate of stronger year in 'twenty, 2 and 23 and the U K.
We previously announced our first contract in Australia with plans to build the campaign based on additional contracts that work was recently deferred.
And is now under consideration for 2020.3 we do believe there is the market and Australia based on P&A that can support the full time presence of a riser based and intervention vessel. We're tendering for work there in 2022, but our expectations for 2002 and 2 are uncertain at this time.
West Africa has.
It's been a positive market for us and 2021 for our <unk>, our Q 7000 and vessel after of Covid interruption and 2020.
Our initial expectations for this market was for a partial year campaign every other year with with just the initial customers we targeted the Q 7000 and began its 2020.
Campaign in January and is expected to remain utilized and West Africa into November and there are ongoing discussions for additional campaign possible, possibly starting as early as January with the successful initial year Theres additional producers now and indicating interest.
We may of <unk>.
1.8 and the demand potential of this market.
This is creating options as we consider our fleet deployment going forward, which brings us to our greatest challenge, which is Brazil.
<unk> worked closely with Petrobras over the past 7 years and the number of ways from stepping up when they found themselves needing additional intervention vessels.
The estimating various commercial accommodations along the way.
From the beginning helix has approached our relationship as the long term collaboration and I'm confident and we've delivered operational excellence as evidenced by being there number 1 and number 2 vessels and the Petrobras fleet for most of the past years.
We've previously.
To provide just and communicated that this environmental and long term.
Contracting would be a challenge for.
And for operators and that has borne itself out. However, recently Petrobras has gone largely quiet and on their future plans.
They've been a solid customer for us and.
And I wouldn't rule out continuing to work for Petrobras, but our plan going forward will be to pursue other alternatives given the options for fleet deployment that I've mentioned.
This may result in 2022 being a challenging year, but ultimately may be the preferred direction to move toward.
Looking a little more near.
We've kept our 2021 guidance at $75 million to $100 million. This may be a bit of a wide range, but it's warranted.
We're fairly confident about our results expected for Q3, but Q4 has a number of variability and the utilization for Q4 for the well up the UK vessels will dependent.
Near term potential award of a significant contract yet to be awarded.
The <unk> and is scheduled to complete its charter extension with Petrobras and August any change to that or other work filling in and after that could have a meaningful impact on Q for the Q..7 currently is planned to work into November and what it does.
And on where it goes from there will impact Q4.
And as Youre aware, we continue to pursue additional droshky type of mature property opportunities the timing of which could also.
Impact results for 2021.
Until these variables of resolve the range and the guidance is warranted with our guidance.
And as we try to.
Lately identify.
And caveat the pros and cons, we currently see and in this environment and it's fair to say, we still have some variables for the second half of the year.
I'd be remiss, if I didn't add some color comments on our robotics business our.
Our team is very adept at capturing what commercial opportunities of this market has and we continue to be the global leader and jet trenching, while competitors have come into the market. The market has grown with the activity from renewables.
We have contracted trenching work into 2022, and even more beyond its possible that we will need another.
Other vessel to cover the potential demand that we're seeing and trenching for 2022.
We're seeing an uptick in construction and support and this is bringing greater demand for our <unk> services.
We're also seeing rates creep up and this will likely be offset somewhat of as we currently do not have.
Plans for a large Jones act vessel and the Gulf of Mexico.
We were awarded and mobilized for a significant project, providing decommissioning the port and Asia Pacific and well continue to pursue additional work in that region, our new offering of <unk> and bolder clearance for the wind farm market began in 2000.
'twenty continues but with less work so far for 2021.
However, we have recently been awarded 2 additional contracts for this type of work.
But the margins are from almost all of wind farm related work are under pressure from competition.
Our credibility has now been validated.
By these recent awards and well continue to explore possibilities for expanding our renewables efforts, where its commercial to do so.
Well, we may not be expecting exponential recovery and the robotics market, but I think get lease.
And we can expect steady as she goes with some potential upside.
The disposition of the 2 S. H vessels no doubt looms large for us we're exploring the options, but at least we have options to explore and with that I'll turn it back to Eric and start the Q&A.
Thanks, Alan and operator at this time well take any questions.
Thank you if you would like to register a question. Please.
It's the 1 followed by the for on your telephone and you'll be here of 3 Tom prompt to acknowledge your request. If your question has been answered and you would like to withdraw please press the 1 and the 3.
And our first question is from Ian Macpherson with Piper Sandler. Please go ahead.
Please thanks, good morning, everyone.
Good morning, Ian.
And it's.
It's hard to remember a time when when the.
The fundamentals and the the utilization of your fleet had been disconnected from.
The Ek customer economics for well intervention given the oil prices so.
It does.
From the cheap seats over here I feel like a when not if question as to the demand recovery probably more in 'twenty, 2 and 21, but you've covered a lot of the fundamentals of golf simply already but just wanted to get your sense on where Scotty on how customers are talking about pent up demand.
Either and the Gulf of Mexico, or elsewhere that that should.
Make more sense to us.
The the where oil prices are now and the high returns associated with.
Intervention projects.
Thanks, and I'll start that 1 off well.
We are seeing a lot more development as I don't want the discussions and the clients.
Especially in the Gulf of Mexico, the Gulf of Mexico, as we came into this year looks very bleak.
What I can say is since the.
Less debt and Ensco, we had and well intervention, we've been awarded 15 projects and over 400 days of utilization between the Gulf of Mexico, and the North Sea the.
<unk> has taken longer to come back, but we feel of that.
And the mobile coming into 2020 free because of the wells are all of our M&A in the context that Nathan.
And the.
And I think and robotics side since the last earnings call. We've been awarded 7 major trenching, and Skype and over 380 days of trenching.
Between the last earnings call and highly ranked 100 days of utilization and awarded to the.
The fleet there.
And there is talk on and on this projects happening but.
It's not as visible as it used to be quarter by quarter and.
And discussions of the consequence of more of a quarterly discussion.
The lack also points out that we are in discussions with for clients for multi year contracts not full utilization.
And utilization.
And obviously, we wanted to camping and we're not locked into team of any of those because of the nice guys of good clients for the honestly looking for longer right. So long ago.
The other rights for the longest sorry.
That's great color. Thanks Scotty.
And before we had this.
The setback with with Covid.
We had a pretty clear line of sight towards deleveraging the balance sheet and.
And.
And moving towards returning cash to shareholders and you've done the heroic job of of grinding down the net debt. Despite the.
Recession and the market.
And I know that the.
Free cash flow for 2022 at this point is probably more uncertain than you thought it would be but it's probably still a pretty high certainty that it's a positive number. So I just wanted to refresh the question on how you're thinking about the balance sheet and capital allocation heading into next year and what sort of signals.
Or maybe EBITDA thresholds.
You would contemplate for revisiting that.
That discussion on cash back.
Well I'm not sure about the EBITDA of part of the question, but our overall strategy is still the same.
We believe we've got the most modern fleet it is a matter of the market.
Covering even even without the market recovering we're on a good trajectory for becoming net debt zero sometime next year I think there is there is.
We're holding cash right now because we want the cash settle our converts.
Don't want to get into and equity settlement there of any kind of.
So there will be a certain amount of cash held back there, but we could deploy the cash if the market recovery started to show greater signs of recovery and we felt more certain about the.
And.
And EBITDA recovery I'm not sure of what level that occurs but the biggest swing factor.
And that is really getting beyond the end of this year with identifying and what's going to happen with the 2 fsh vessels down in Brazil, primarily.
The North Sea I feel I feel pretty confident that the north sea will be.
The much stronger to vessel market next year I think the Gulf of Mexico is going to be stronger next.
Year supporting 2 vessels the Q 7000 as of <unk>.
<unk>.
And then I've mentioned, a number of places where we have options of redeploying the assets vessels.
So, but I think it would we need to get some clarity as to what's going to happen with those vessels and what the.
Financial impact is going to be once we get that cleared and we see a path.
<unk> towards the stronger market, then we'll return to the plan of routes.
Returning value to the shareholders.
It makes a lot of sense, thanks, Alan and thanks, everyone.
Our next question.
It's from the line of Mike Sabella with Bank of Bank of America. Please go ahead.
Hey, good morning, everyone.
In the morning.
I know, there's still a lot of uncertainty and second half of this year.
And the path of said 21.
Likelihood of cyclical bottom and you kind of touched around.
Many of the moving pieces here and there I was wondering if you could just kind of give us and update as to whether youre still thinking this year is generally the bottom from EBITDA perspective.
Just as well.
As we're moving forward and thinking about all of these moving pieces next year.
Higher.
The other guy.
And again I think the biggest uncertainty or the 2 Osage, Brussels, where we wind up deploying those and what rates we can achieve.
Steve.
Think of another variable is what happens and the rig market right now for.
Looking out in 2022, I don't see utilization as being.
The bigger challenge I think the bigger challenges achieving.
Better rates and Thats totally dependent on what happens with the rig market, whether or not consolidation and keeps occurring.
And whether or not the retirements keep occur and the market needs to tighten up.
No.
So I don't know if.
I don't know.
'twenty, 1 is the bottom year or 'twenty 2.
I'd say 'twenty, 1 'twenty slash 22 is the bottom and we are expecting tremendous recovery by 'twenty 3.
Understood.
That's helpful and then as we.
We kind of think about.
Just from a capital perspective.
Got the $20 million to $35 million budget this year.
Is that is there anything coming on the horizon that we should be preparing for the keno.
Can we kind of think that debt that you all are expecting to stay sort of in that range for.
For the foreseeable future.
And I do expect us to stay in that range, we will try and manage it of the next year of 2022 is a little heavier year for us on dry docks.
And there are some potential capital expenditures debt will be required depending on the.
The fleet disposition as to where they go and that has to do with the system's cfcs and getting the ancillary equipment that we need in order to.
Enter into different contracts.
Understood. Thanks, everyone.
The b.
Our clear right now the 2 vessels down in Brazil, we do not have our intervention systems onboard we use intervention systems provided by Petrobras.
And to the extent that we go a different direction and we will have to.
We will have to make sure that we have our systems on board.
But we're not talking major map.
Yes.
And in addition for this year and it's not.
Sheesh assistant no I think well be able to manage.
And more or less at the same levels here going forward.
We have nowhere and for decoration company.
<unk> capital expenditures.
B.
Our next question is from the line of of Taylor, and Searcher with Tudor Pickering and Holt. Please go ahead.
Hey, good morning, everyone and thanks for taking my question I just wanted to follow up on some of the potential range of outcomes for the 2 Brazil vessels.
It sounds like your.
And when you start net to bid those vessels into other markets outside of Brazil, and I was hoping you could just remind us what and what sort of markets or are those vessels ideally suited for and.
And to the extent and they find some work outside of Brazil, where should we expect them to the to go back to work.
And it's early days yet and.
And we're not giving up on Petrobras it's just.
Up until 2019 collaboration was the word we heard of often.
Right now.
Not talking to us at all and certainly not using the word collaboration.
We're starting the planned on life without Petrobras the true.
And if it came to that but I wouldn't rule out Petrobras stepping up and taking the vessels I think the.
And they performed well they've they've done exceedingly well with them and they have a need going forward, but beyond that I touched on some of it and my color comments.
And then Scott you mentioned the amount of trenching work, that's increasing and we could.
Could oh and alternative market the number.
The number 1 there's an awful lot of intervention work and West Africa more than we thought.
We have the Australia and market that we believe is the market capable of supporting the vessel full time.
The North Sea, we are waiting of outcome of a significant award.
That could also absorb of vessel beyond that you get into fallback positions, which maybe 1 of the vessels is used as the the additional trenching assets that we're going to be needing so instead of picking up 1 and the open market we use it.
And then the ultimate fallback would be of combination work.
And so I think Theres, a number of places where we can find the utilization it just depends on the rates of debt.
Will determine the outcome financially.
Okay, that's very helpful and and my follow up and Ian first question. It sounded like you are in discussions around some potential multi year contracts and I assume that's on the on the well.
Well intervention side, and and if I heard that correctly and just curious if you could give us a bit more color is that is that going to be around the gone vessels, the Brazil vessels and were and kind of a mix of anything just any more kind of there would be helpful.
Yes, I'll take that that's true.
Gulf of Mexico for.
Good clients and we've had over the years.
And decadence of multiyear.
The multi year not for utilization of that good utilization.
Okay, great. Thanks, guys.
Our next question is from the line of James Schumm with Cowen. Please go ahead.
Hey, good morning.
I was wondering if you could help me.
And then the relative earnings contribution within production facilities and <unk> between the HP, 1 each share far S and dry ski.
And then how do you expect this to change and the third quarter with the new <unk> well.
So.
Jim and the second.
Understood production facilities, obviously is driven by by HP, 1 and what it's capable of doing on that contract we had a little bit of benefit from the new H WCG contract.
That we have in place.
And I think there was next to no benefit and it might have actually been negative.
Quarter as we from the.
From the production as we did the re completion in April and then there was facility maintenance in the months of May and June before the <unk>.
And he came back online in July.
So obviously the drivers are still of the HP 1 there was a little.
And the benefit from from the H WCG and like I said next to nothing from production.
Thanks, Eric and then and then is there any way you could help.
Give us a sense of what Q3 might look like with with the production coming online from the new Droshky well and.
And.
Maybe it sounds like you get a little bit more benefit from the HW C. G.
I would expect right now that the.
And the benefit that we saw and the second quarter on <unk>.
And would go forward into the third quarter I don't expect it to be minimal.
A.
Uptick I guess in that area I expect it to be and the same range I would expect to see a benefit and production.
Once again dependent on uptime of that facility.
With the re completion that we had and once again I would expect the the benefit from production to be greater than what it was.
In the first quarter.
Mhm, Okay. Thanks, and then maybe just sticking on this can you the the HP 1 is contracted through at least June 2023, I believe and.
And well that contract being extended or what are the options for that vessel in 2 years' time.
Yes, you are correct. The the vessels under contract through June of June pressure of June 1st of 2023.
That is a vessel that we are.
And we put it into service and I think 2010 associated with the Phoenix field.
And.
And then as part of the divestment of the oil and gas it continues to operate for the.
And the owner of their processing from the from the Phoenix Field I think our expectation is that that field has a life debt.
That's longer than 23, so our current expectation.
And as of that vessel will be.
Producing from that field.
For several years to come.
Great and sorry, if I could just sneak 1 more like well what do you think the useful life of the vessel is like how many more years can you get for.
And the HP 1.
Good.
Like my old Hammer I've got 3 new heads for new handhelds, but it's the same old hammer.
Okay.
Okay. So.
So okay alright, thank you very much guys. Thanks, Jim.
Our next question is from Igor Levi with BTG.
Brad.
Good morning, guys.
And I know, we've talked quite a bit already about the Brazil, but I was hoping you could clarify and how competitive are the siem vessels outside of Brazil, I remember they were initially built with the Petrobras contracts in mind. So in other words the destock 1.
1 of those vessels and the tender against the Q vessels and the Gulf of Mexico are of West Africa, how would they perform and a tender.
Yeah.
I'll handle that 1.
Uh huh.
And that's the very similar type of vessels.
Relatively similar cost base, when we come out of Brazil.
<unk> of our costs have come down sort of be somewhat in line and so.
If you put the Siem helix 1 side by side for the Q 5000.
And it's out of the reserves kind of a similar cost base and the capability.
And I b quite and equal position.
Great that's very helpful and.
Site clearance work through the end of the year. It still seems like you know some of the larger projects that you had last year and not repeating but do you have any kind of.
You know.
Outlook any kind of scope for for any projects that you already discussed.
<unk> with for next year that are larger.
Basically there of point, where you see some of those projects coming back and what's the competitive market and site clear and light compared to a year ago. When you were able to win some of those bigger projects.
Well first and foremost this is a very competitive market.
And it's an increasing market next.
Next year, we actually believe there'll be a lot of that because it's so dependent on the time and of the the wind farms and the European market.
So the next year, well see a bit of of this year. We've won our second project, which gives us credibility.
We're in discussions for the fed project the Woodbury.
For this year next year it would be alone, but then we see a huge increase in activity in 2020.
And it's very competitive market, but now we have some credibility behind us and we've secured.
A large project that started last year and has gone into this year and we've got a second 1 cut our second year of exciting project now so.
It's a service that will keep providing but it's not huge margin is just a day.
<unk> services.
Okay.
Great. Thank you for the answer well turn it back.
Yeah.
As a reminder, if you would like to register for a question or a follow up please press the 1 followed by the for.
Our next question is from Samantha Hoh with Evercore ISI. Please go ahead.
Hey, guys. Thanks for.
And for your question.
And you mentioned that you're in discussion with multiple clients for multiyear contracts and that.
These customers are looking to lock in current rates for longer and I was just wondering what the discussion around maybe potentially seeing higher costs during that period.
Are those for me is gonna be index, and then just an.
For taking like what Youre seeing on the cost side.
So most of our contracts do carry some sort of cost increase wherever its index linked so just the percentage driven and say well, obviously and those discussions will be trying to answer that either the.
The free tier 5 year periods and the cost will increase.
Data of our personnel costs will go up our R&M costs will go up and the market recovers and those indexes and and percentage rises that we try and keep the pension.
Accounts were against those.
Again, like we said earlier, we don't want to lock into too many of these businesses and I were talking about a favorable clients clients that we've had a good track record and a good history with and we're.
Kris and after this to everybody is going to be well keep it free of for clients types of good utilization to allow us to.
The deal with the rest of the market as the recovery comes.
Okay and then the.
And what was the Inc.
Trenching.
And Jay.
And I'll kind of things that you guys might add.
And can you speak to just sort of what.
What the economics.
The economics are well.
Deciding to out of country.
And there like.
1 third party equipment providers and with Joe and I'll, just kind of wondering if there's like a long.
The cycle just to wait.
And I'd like to open it.
And sales in terms of what's sort of the return profile of you betcha.
The required quarry to actually go ahead and make the decision to other countries.
So I'll go ahead and try to frame frame it up and then Scott if you could fill in but I think Samantha when you look at it we currently have for <unk>.
This season, we have a 1 trencher spread working and in the North Sea and I think Owen alluded to that perhaps we might have a second spread working next year and so it would just be a matter of deploying and 1 of our existing assets.
1 of our existing centers onto a second vessel and working that spread.
And next year, So I think it's definitely within our existing assets of <unk>.
Capabilities as far as as far as the opportunities are going forward well.
Wouldn't meet the pick up.
The vessel of opportunity to support it.
And 1 of the sites vessels this quarter.
Sure.
Yeah.
There is some competition and the trenching market, but we do consider ourselves of the market leaders and we have held rates both of the jet trenching and hard ground trenching throughout this COVID-19 period.
And like I said earlier, and Thats significant and sizable awards for trenching, and the renewables and oil and gas market and 'twenty 2.
<unk> 'twenty free and have significant tenders out there, where we believe we're the preferred supplier for 'twenty 4 and onwards.
Okay, Great and just.
A couple of more if I can.
Can you quantify how much for working capital contributed to your Q2 cash from operations.
So we did have.
And a significant benefit from working capital here and in the second quarter. It was it was quite.
And it was a significant contributor here and the second quarter I think overall, we talked about our expectation for the year are are.
That working capital would be.
Would be flat.
For the year, which would imply of potential draw and the second half, but that's all dependent on as we said the the.
And the workload and expectation for for 2022.
Okay, and if I can speak on the floor.
And the dispatch of responses and the golf.
And is that now going to be sort of like a steady contributor to the segment or is that more of the callout type.
Uh huh.
So the the Theres 2 components of the HW CCG, there as a retainer based fee.
Net.
The.
And it covers I think the 2 year.
Period, where we would expect steady contributions to.
To the expect that there is a call out that would be on top of it.
And then you have the callout piece last quarter.
Sorry.
Is there a call out component that contributed to the Q2 results.
No.
Okay.
Thank you.
Okay.
And the Mr. Staffed all of it appears we have no further questions at the time of return the call back to you at this time Sir.
Okay. Thank you thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our third quarter 2020.1 call.
In October and thank you.
And that does conclude the conference call for today, we thank you all for your participation and kindly ask that you. Please disconnect your lines have a great day everyone.
Yeah.
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