Q1 2022 Helix Energy Solutions Group Inc Earnings Call
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Yes.
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Greetings and welcome to the first quarter 2022 earnings call for Helix energy solutions. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the phone your telephone.
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As a reminder, this conference is being recorded Tuesday April 26, 2022, I would now turn the conference over to Brent Arriaga, Chief Accounting Officer. Please go ahead.
Good morning, everyone and thanks for joining us today on our conference call for our first quarter 2022 earnings release participating on this call for helix today are Owen Kratz, our CEO Scotty Sparks, our COO, Eric <unk>, our CFO cannot Kirk our general counsel and myself.
Hopefully you've had an opportunity to review our press release and the related slide presentation released last night.
You don't have a copy of these materials both can be accessed through our 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.
During this conference call, we anticipate making certain projections and forward looking statements based on our current expectations. All statements in this conference call or in the associated presentation. Other than statements of historical fact are forward looking statements and are made under the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Actual future 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 two and our most recently filed annual report on Form 10-K and in our other filings with the SEC also during this call certain non-GAAP financial disclosures may be made in accordance with SEC rules 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 helix ESG Dot com.
Yeah.
Good morning.
I hope everyone out there and their families are doing well, thanks healthy and safe.
Morning, we'll be reviewing our Q1 results and performance our current operations, our view of the underlying market environment and how we think it will influence 'twenty two and beyond.
And updated expectations for 2022.
Moving to the presentation slides five through seven and provide a high level summary.
Yeah.
[noise] excuse me, let me just clarify.
I'm sorry.
As expected the year started slowly for us our performance for the quarter was slightly better than expected impacted by winter season in the North sea regulatory maintenance on our vessels in the low revenue transition period on the Siem helix one for the quarter.
Hmm.
Oh, the Q 7000 continued successful operations in West Africa.
Q4 thousand had strong operational performance with minimal downtime in the Gulf of Mexico, We completed regulatory maintenance on the Q 5000, Siem helix, two and the well enhancer.
Robotics delivered solid results for the first quarter limiting the impact of the winter season.
Production facilities continues to be a steady performer and benefited from the production of our Droshky field.
On the sales front, we secured a two year term contract, we're trying in Brazil and signed a three year contract in the Gulf of Mexico with shell for an anticipated 75 days per year with the option to add additional.
For sure.
Revenues for the quarter were $150 million with a net loss of $50 42 million and EBITDA of $2 5 million.
Our gross profit was negative $19 million.
Which is a negative 12%.
On to slide eight for a balance sheet perspective, our cash balance at the end of the quarter was $230 million with an additional $73 million and temporarily restricted cash primarily associated with the short term LC for work in West Africa.
During the quarter, our operating cash flow was negative $17 million, including $10 million of dry dock and recertification costs.
We spent 1 million on capex, resulting in negative free cash flow of $18 million at quarter end, we were in a negative net debt position of $1 million.
I'll now turn the call over to study for an in depth discussion of our operating results.
Thanks, Alan and good morning, everyone moving on to slide 10.
Onshore and offshore it seems within a fantastic job keeping our operations functional in space.
As previously mentioned, we took the opportunity at the slower winter months to undertake several regulatory maintenance and inspection programs that impacted utilization and the well intervention fleet for this quarter.
By undertaking maintenance periods in the first half of the year it should allow us to maximize our presence in the improving markets and better rates environments in the second half of the year.
In the first quarter of 2022, we continue to operate 12 vessels globally with minimal operational disruption continuing to operate high standards with 96, 3% uptime efficiency for the quarter.
During the first quarter, we produced revenues of $150 million, resulting in a gross profit margin of negative 12% generating an operating loss of $19 million.
EBIT for the quarter, a $2 5 million.
In the first quarter, the well intervention fleet achieved utilization of 67% globally with 86% utilization in the Gulf of Mexico, 87% in Brazil, 100% utilization in West Africa, and as expected through the winter periods, we had low seasonal utilization in north sea.
The robotics chartered vessel fleet achieved utilization of 90% in the quarter operating five vessels working a total of 323 vessel days between RV supports trenching renewable what's globally.
Yeah.
Slide 11 provides a more detailed review of our well intervention business in the Gulf of Mexico.
The key 5000 had utilization of 72% in the first quarter performing abandonment work on three wells to TD customers.
<unk> completed a planned regulatory maintenance period prior to mobilizing the jointly owned helix Jay 15, K intervention system conducting production enhancement operations in ultra deepwater preferred customer.
The key for us.
<unk> had strong utilization increasing to 19, 9% in the first quarter compared to 90% in Q4.
The vessel continued a multi well campaign undertaking production enhancement on numerous wireless abandonment work for one well for one client in ultra deepwater.
Pleasingly, both vessels have high utilization contracted work for the first half of 2020 with contracted and awarded works into the third quarter and good visibility of potential further activity with steadily increasing rates.
During the quarter, we signed a multi year contract with shell a long term important clients of ours in the Gulf of Mexico.
And Canadian optional days huge size any of the key for <unk>.
<unk> 5000 <unk>.
Work under this agreement is expected to commence in the third quarter of this year.
As stated in previous calls the key vessels have integrated helix Schlumberger alliance teams and equipment permanently installed working under one contract offering our clients numerous benefits. This has now become the contracting mechanisms for most of our clients in the Gulf of Mexico.
We are also offering this option globally <unk> seen an increased adoption of this method of contracting.
Moving to slide 12 I'll.
Our north sea well intervention business had expected low utilization in the first quarter or second both specials as we seasonally do issuance from nice in the quarter.
The well enhancer achieved 16% utilization in Q1, the vessel was warm stacked and leave Scotland significantly reducing the vessel operating costs and crew levels and undertake regulatory drydock maintenance in Holland as planned.
The vessel then performed a one well production enhancement Skype for one customer.
The Seawell remained on pilots in the robotics division with minimal remaining inquiry to undertake site clearance and bode removal on the renewables project that lasted into February .
Then performed a small one well production enhancement Skype trying to be more effectively with significantly reduced crew level. It was in vessel operating cost.
Vessel, then commence regulatory drydock maintenance and inspection in mid March in Holland as planned.
The <unk> market is finally, improving.
Season is scheduled to commence in a slightly later than in previous good seasons, asking which we do see achieved vessel markets and are expecting rates to hold with good utilization were contracted and awarded work into Q4 for both vessels and pleasingly. We also have clients taken interest for 2023.
In West Africa. The key 7000 had another strong performing quarter in Q1, with 100% uptime, where can we have a multinational integrated helix Schlumberger Airlines team. The vessel performed black on nameless wells in the quarter conducting production enhancements and P&I activity for two customers.
Divestments completed work in Nigeria in April and then completed transit to eliminate.
And has commenced its planned regulatory maintenance and inspection program expected to asking Tonight thereafter, the vessel schedule is still open.
<unk> have been identified in West Africa in Q2, and Q3 and provided these wells are contracted the vessel would stay in West Africa to perform this work.
However, should the work not materialize, we expect that we would commence the pay transit to the APAC region in preparation for our contracted work and New Zealand.
Moving to slide 13.
In Brazil, the Siem helix, two had 74% utilization compete and its planned regulatory maintenance periods and then perform production enhancement work on two wells during the quarter the vessels contracted to Petrobras until December and we've commenced discussions regarding potential flavor extensions.
The same helix one was 100% utilized on a short term Sps so an accommodation support projects in Ghana that is expected to last into May.
The vessel then is expected to return to Brazil to commence awarded RV survey work prior to commencing the longterm decommissioning projects in Q4 on the recently awarded charter contracts. The contract runs for an initial two year period, we've improved rates year over year with additional really options to extend the contract.
In Q1 due to the increased market activity, we extended the siem helix charges with expected lower costs. The Siem helix, one is fixed fee and extended to the new <unk> and the Siem helix two has been extended to a new five year term.
Moving on to slide 14 for our Robotics review.
But <unk> had a good quarter, considering the seasonal winter conditions and got off to a good start for the year. We continued to see an improving market operating five vessels during the quarter, including the seawell primarily work in between Trenching, RV support decommissioning and non oil and gas and renewables related projects.
In the APAC region.
Brian can you can see you at 100% utilization in Q1, the vessel completed work in silence undertaken a wellhead decommissioning project and is now in transit to Taiwan to undertake contracted renewables work expected to last into late Q3.
In the North Sea, the Grand Canyon, III, which utilized 73% undertake in oil and gas and renewables trenching operations to free clients.
The vessel is contracted oil and gas and renewable trenching scopes, which are anticipated to keep the vessel busy for most of 2022.
The project chartered vessel with Asarco had 100% utilization continuing site clearance and survey works that is now expected to last into Q3.
The Seawell was also a project started to robotics conducting 39 days clearance and survey works.
We are now also some charter the second trenching vessels for the North Sea.
Ryzen enabler is planned to be localized with the <unk> hundred trenching system and as contracted work trenching on oil and gas and renewables projects commencing in may for each of Q4.
In the U S. We have recently chartered this year the board alone a Jones Act compliant vessels for one year.
And what's in the Gulf of Mexico, and for renewable works on the Usc's coach.
Robotics took delivery of the vessel in mid February and achieved 74% utilization on the second of salvage project for one customer and RV support what extra to customers.
In mid to late Q2, divestments schedule to try and get to a USA East Coast Wind farm sites to undertake renewables works contracted to last into late Q3.
The robotics groups working to the agreement renewables sector continues now securing work started in the European region, but also in Asia and on the U S East Coast.
All five vessels of the current robotics fleets are contracted to undertake renewables projects in 2022, and we continue to see tender activity increase Federated renewable services, we provide globally.
Over to slide 15, I'll leave this slide detailing the vessels are being trenching utilization for your reference.
I would again like to thank cosmetics glad with team and partners continually doing a fantastic job.
Our market is recovering and we fully plan to see a much improved second half of the year globally. There is more interested in our assets visibility of where contender activities increasing contracts are getting signed now scheduled for Titan.
We are pleased to have recently been awarded two long term contracts.
<unk> is now in recovery finally rates and utilization are improving in the Gulf of Mexico, and Brazil, we are diversifying our customer base beyond Petrobras and more clients, who are available to us now than previously.
Had a strong period in West Africa, and built a good reputation due to the continued level of high performance and see further tender activity in the region.
We still must deal with the complex scheduled for the <unk> 7000, as we made pricing to the vessel head into the APAC region contracted work.
Robotics has good contracts in place and most of the year expanded services and its global footprint and we've recently added two vessels to the fleet.
For the second half of the year is talking to that much better for us I will now turn the call over to Brent.
Thanks, Scotty moving to slide 17, it outlines our debt instruments and their maturity profile as of March 31.
Our total funded debt was $610 million at the end of the first quarter maturities during the remainder of the year primarily include the remaining $35 million due on our 2022 convertible notes, which mature the first of May.
Moving on to Slide 18. This slide provides an update on key balance sheet metrics, including long term debt, our net debt levels at quarter end.
With cash and restricted cash of $303 million as of quarter end, we were in a negative net debt position of $1 million.
Our cash position at the end of Q1 was $230 million with an additional $73 million of restricted cash primarily supports a temporary project LLC.
At quarter end, we had no no amounts of debt.
We had no amounts outstanding and $41 million of availability under our ABL with the resulting liquidity of approximately $271 million.
I will now turn the call over to Erik for a discussion on our 2022 outlet.
Thanks, Brett as we previewed last earnings call and as our results. There are first quarter was very challenging we believe this quarter signifies the bottom of the market for helix, the north sea seasonal slowdown the slow recovery of the north Seawell intervention market.
Deployment of the Siem helix, one and a combination for us.
And for well intervention vessels incurring maintenance during the quarter all combined to negatively impact our results positive developments. During the quarter include the long term contract in Brazil, and multi year contract in the Gulf of Mexico, both indications of an improving market that.
That being said, we still face significant variability in the near term and therefore feel its premature to provide quantitative guidance for 'twenty. Two at this point many of the areas should resolve in the near term and we hope to be in a position by July to provide quantitative guidance. We can say this much on how we see the year unfolding for the balance of 2000.
'twenty two.
As mentioned, we expect Q1 will be our weakest quarter in what we believe will represent the bottom of the market for helix beyond Q1.
To see recovery and anticipate all seven well intervention vessels working in 2022, the market is improving but contract awards continue to take longer to secure in the Gulf of Mexico, well intervention. Both two vessels are working the spot market.
The vessels have contracted work into the second half of 2022 with additional opportunities that seem to be coming together, we expect both vessels to have strong utilization in 'twenty two with the added backdrop of increasing rates and building backlog in 2023.
In the North Seawell intervention business, we expect to have the well enhancer and seawell working a good part of the good weather season. Once work commences as scheduled in mid Q2 with some potential gaps north sea market has been slow to recover but we are slowly starting to see signs of increased activity for 2022 Mds.
In Brazil, the Siem helix two is on contract into December the Siem helix, one is on the lower rate accommodations contract into mid year.
<unk> been awarded <unk> survey work in Brazil prior to the planned commencement of decommissioning work for <unk> at the end of 2022.
In West Africa. The Q 7000 completed its contracted work in April and subsequently transited to Namibia for maintenance.
The Q 7000 provides the largest variability in our potential 2022 results, which fits uncertain schedule of additional work in West Africa. Prior to its planned transit to the APAC region to commence with Tuohy field abandonment.
In robotics, we expect improvement year over year, driven by sourcing renewable activities driving increased trenching opportunities in site clearance work.
From increased vessel activity in the Gulf of Mexico, and renewables activity in the U S developing in 2022.
The recent addition of the chartered vessels in the Gulf of Mexico, and the seasonal charter for a second trenching vessel in the North Sea are evidence of the improving market.
Production facilities should be fairly consistent with production variability as the Droshky field continues to do fleet. We continue to look for opportunities to replicate that model of taking our operators decommissioning liability in exchange for late life field production.
Once again with many uncertainties that we're currently seeing we feel its premature to provide quantitative guidance for 'twenty. Two at this point, we hope to be in a position in the near future to provide quantitative guidance.
Providing more color by segment and region on slide 21.
First with our well and work.
Well intervention segment in the Gulf of Mexico. This is likely our strongest market with improving rates and expect a strong utilization of the Q4 thousand to 5000 contracted.
Contracted work extends to Q2 and Q3 to Q 5000 completed its regulatory maintenance period in Q1, and Q4 is expected to complete it.
Its regulatory maintenance period in Q2, we expect strong utilization in this region and expect to fill schedule gaps.
In the UK North Sea the Wall Hampshire completed its regulatory maintenance period in Q1. The vessel is currently idled, but is expected to have good utilization starting in may the seawell is expected to complete its regulatory maintenance period in Q2 and has contracted work in Q2 and Q3 with potential gaps in the schedule.
In West Africa. The Q 7000 completed contracted work in April and subsequently present in Namibia for maintenance approximately 40 days.
7000 schedule is very uncertain with potential opportunities in West Africa prior to its transit to the APAC region for the <unk> field development.
In Brazil, the Siem helix two.
Contracted into mid December with Petrobras the Siem helix one is performance accommodations work in Ghana. The vessels scheduled to perform RV survey work in Brazil prior to its contract with small element.
<unk> in Q4.
The work for Triferic is now a 24 month contract with options to extend.
Moving to robotics Slide 22, the Grand Canyon II is in APAC is on contract into Q3 and is expected to have good utilization for the balance of 2022 in that region.
The Grand Canyon III is contracted to perform trenching in the north sea for multiple customers with expected strong utilization.
The North Sea, we continue to incrementally benefit from the renewables site clearance work expected to continue into Q3.
We have secured a seasonal charter for parts of 22% and 23 horizon enabler, who contracted trenching work in the North Sea in Q2 and Q3.
We are working Mr. Lea boardwalk in the Gulf of Mexico before planned transit to the East coast for contracted wind farm work with expected good utilization moving.
Moving to production facilities. The HP one is our contract for the balance of 'twenty two with no expected change we have expected variability with production as the Droshky field continues to deplete and we continue to pursue similar opportunities which could impact our results.
Continuing on slide three our tax rate.
He was heavily impacted by the amounts from 'twenty, one pushed into 2020 to approximately $20 million with a heavy regulatory year. Our capex range for 2022 is 45% to 55 million. The majority of our Capex forecast continues to be maintenance and project related which primarily falls into our operating cash flows.
<unk>.
Reviewing our balance sheet, our funded debt of $310 million is expected to decrease by $39 million with the remainder of 2022 as a result of scheduled principal payments, which includes the maturity of our remaining 2022 convertible notes of $35 million, which we intend to settle in cash.
I'll skip the remaining slides starting with slide 24 and leave them for your reference at this time I will turn the call back to Owen for discussion on our outlook beyond 'twenty, two and for closing comments.
Thanks, Eric.
As indicated in our last earnings call 2022 is planned to be a transition year for helix with positive signs for a robust recovery ahead. There's a lot that we can do to prepare to maximize the operating leverage that our market position to make possible.
Q1 was weak, but stronger than we expected and we do expect that it will be our weakest quarter going forward with the second half of 'twenty two expected to have a run rate.
Greater than the full year run rate of 2021.
We took advantage of the weather related off season to go ahead, and do a significant amount of required maintenance work on our floating assets as well as intervention systems in anticipation of strong utilization.
This includes an expense of 45 day downtime period for the Q 7000 commenced in early Q2.
The reason for this maintenance period is that the Q 7000 has operated basically non stop offshore on dps since the beginning of 2021.
Some deployed.
And the water for approximately 225 consecutive days.
It was an outstanding uptime achievement, especially as what occurred during Covid Lockdown in Nigeria, where logistics in technical maintenance support.
We're extremely difficult.
The regulators finally, David.
By which we had to do the work, which explains why theres two maintenance periods. This year.
We believe certain transitory headwinds will make 2022 a challenging transition period, including first the Q 5000 completed its long term partial utilization contract with BP in the second quarter of 2021, then shifted to a three year term call off arrangement for the vessel.
The Q 5000 is achieving.
Utilization consistent with historic levels, even as VP is expected to have little contribution until 2023.
For 2022 were lower than might be expected as we offered lower rates prior to the end of last year, the hedge utilization and that was before we saw the pickup in the market.
We intend to honor these rates for 2022, but expect a meaningful increase in rates for 2023.
No.
The two steam vessels in Brazil completed their long term contracts with Petrobras.
Petrobras released DSO, each one but retain the assets too.
Right.
<unk> and a marginally negative contribution to EBITDA for 2022.
The market improvements did not materialize in time for us to secure an intervention contract for BSA. Each one for 2022, so replacement on a walk to work contracts in West Africa has a significant negative contribution to EBIT for 2022.
Combined we expect these two vessels to negatively impact year over year EBITDA by more than $50 million in 2022.
We expect the full amount of Vascepa Das wing to fully reverse for 2023, we've already announced the two year plus contracts beginning in Q4 for DSA, each one and the intervention and we're pursuing multiple opportunities for the stage two including a contract with Petrobras potentially returning to meaningful profitability.
Given the expected strong demand ahead for these vessels, we negotiated an extension of the charges for both vessels and believe they will make a strong contribution again, starting at the end of the year with expected lower cost.
Third we're also planning to shift the Q 7000 to the APAC region. Later this year on the basis of two contracted rewards.
And the visibility of a strong PMA decommissioning market in the region for the foreseeable future.
While we've done a lot of work in Nigeria. It may take some time for our backlog through builds were renewed campaign, we do see Nigeria has a strong future market and helix has established our credibility welfare and additions demand and interest in <unk> and <unk> growing.
Growing building on the success that we demonstrated in Nigeria.
As West Africa visibility grows into a strong alternative to Petrobras in Brazil should Petrobras continue to attempt to press the market advantage that they've enjoyed for the past couple of years.
We may we may actually be short of assets for 2023 to cover all potential demand, especially as the rig market is expected to further tighten.
All of these transitional events create uncertainty for forecasting a precise range of results for 2022 other than to say it'll be a down year.
Year over year from 2021.
However, other than these transitional issues most of the business units in the company are expected to be up year over year somewhat offsetting the transition transitory headwinds.
All indicators point to a strong recovery in 2023.
All of the things mentioned here can be considered as a result of transitioning from a soft market to a much improved market with helix will be working on a transition in our market position.
The helix business model does not focus on what might be considered the upstream portion of the oil and gas market.
While our assets and capabilities can be used in development our greatest value add comes from towards the later lifecycle of oil and gas in the early phases of offshore wind development.
Going forward, we'll be emphasizing this and focusing our future returns from these elements of energy transition.
Our focus will be on three legs business model first maximizing remaining reserves.
Which is good which means enhancing and extending the life of the existing reserves.
And Thats, what our assets and methodologies were specifically designed for alternative less efficient rigs, which are designed primarily to drill and complete new reservoirs.
In addition, he looks offers a unique alternative to producers and which helix is both willing and capable to take over or contract operate and manage end of life reservoirs in preparation for Panama.
Second leg of the business model is abandon the well.
While worked and maximize recovery remaining reserves is increasing we see the long anticipated abandonment work growing even faster no matter what happens with commodity prices backlog of abandonment will continue to grow for the foreseeable future.
This is especially true for the U K, North Sea, Brazil, Australia, and the Gulf of Mexico in the near future.
Well work, while wealth DNA is now approaching over 50% of our intervention work. It is our intention to expand our capabilities around full field of Panama.
We intend to add shallow water full field abandonment capabilities over the course of 2022 in anticipation of a very strong market for 2023.
Third leg I mentioned is offshore wind.
As many of you know, it's very difficult for contractors to actually achieve a satisfactory return from wind farm.
Valuations are high as a result of current sentiment, but actual returns are elusive.
For years now the primary focus for helix robotics has been its jet trenching with much of our work derived from bearing cables for wind farms are focuses on jet trenching, rather than plowing jet.
<unk> requires a higher level of technical expertise.
There isn't an established global leader in this niche and as a result is able to generate satisfactory margins.
<unk> six.
To provide specialty support.
Select specialty supported services, where margins can still be achieved.
To this end and 19 in 2019, we expanded our offering to the wind farm market to include bolder and <unk> zero clearance. We have now established helix credibility in that market and are achieving successful awards both in the U K and now in the U S, where we have a distinct competitive advantage.
We'll continue to seek out and add additional specialty English support services as the opportunities present themselves. This would be a long term prudent growth approach to building on the value add that we can bring to the renewables market we.
There are a number of moving parts to accomplish over the course of this year in preparation for what we hope is a strong performance in 2023.
These three legs to establish <unk> as a meaningful energy transition company with significant potential there is a lot to do in 2022, but a very bright future.
I'll turn it over.
Q&A here.
Operator at this time, we'll take any questions.
Yes.
Thank you.
If you would like to register a question. Please press the one followed by the following your telephone.
<unk> Com technology a request if your question has been answered any reflects the Australia registration. Please press. The one followed by the three one moment. Please go ahead first question.
Our first question comes from the line of Ian Macpherson with Piper Sandler. Please proceed with your question.
Thank you good morning, and thanks.
Good morning.
Okay.
I think I think the withholding of guidance is weighing on the stock. This morning, I know you've spoken through the reasons for having some reticence, but.
When we just go through the.
Vessel by vessel outlook. It seems like the backlog is pretty much in place for this year and into Q4. So I just wanted to press a little bit on what particular elements remain to be clarified.
That gave you the decision to wait until next quarter too.
The guidance for this year.
It just seems like everything is reasonably visible now scheduling wise for this year.
So I think this is Eric I think youre right as far as some of the assets that we have.
Deployed out there there are a couple of things that are sort of weighing on us as far as.
Delaying providing guidance I think the single biggest one is is the Q seven.
As we stated that completed work.
I think we have a lot of a lot of options that we have Wayne and lots of opportunities that we are still pursuing we know that we have.
A contract to start towards the end of this year beginning of next year and APAC, but other than that it's very fluid and any single every single montage significant variability to our overall results of the Q 7000 is a big one I would tell you that the Q.
The U K North sea market.
Starting to see signs of life and we do have contracted work, which is a positive there is still a bit of variability there and that there is identified work, it's not fully contracted yet so theres always the chance.
In this environment, we're contracting has taken longer than anticipated that we could have still.
<unk> developed in our schedule.
In the UK North Sea I think we also have a little bit of that risk to a less extent in the in the Gulf of Mexico.
The contracting risk that has weighed on us.
Throughout the last couple of years.
Is potentially still out there, but you could say a lot of positives.
<unk> the discussions with our customers and activity, we just need to get those contracts across the line to really solidify our schedule.
Yes, I'll, just add a little bit to that just some specificity.
Right now we're in this 45 day.
Maintenance period with the Q seven.
We're supposed to go back to Nigeria, because of the timing of this maintenance was regulatory driven.
How much work there is remaining to be done in luxury is an uncertainty.
Then there is interest in Angola, whether or not that materialize, but we also have the.
Contract Dominic Zealand, so the bigger the biggest uncertainty for US is just the timing of the work.
First the work and the timing of the work for the <unk> 7000 for the remainder of the year, but if I if I could.
Yes.
It's not hard.
A little bit of color just based on what we.
We have mentioned to you.
If I were to just start with the street.
Declaration of 65.
EBITDA and we've already mentioned that the impact of the two cm vessels was $50 million.
Ben.
Then that would imply without the impact of the Siem vessels year at 115, and Thats after incurring additional maintenance costs, which are historically unusual for us, we're accelerating them and the regulatory period here.
So that gives you a bit of color as to what this year and Thats why we said that.
Looking at the second half of the year. The run rate was actually that's actually going to be higher than last year.
So that gives you some means of quantifying it until we can sort out the timing of the uncertainties and provide more specific color.
<unk>.
The next earnings call.
Got it.
Comment.
Higher run rate for the second half of this year was comparing second half of 'twenty two.
On an adjusted basis to full year 'twenty, one or were you comparing one an unadjusted basis <unk> will be at a higher run rate than <unk> 'twenty one.
I think very simply you just doubled.
Second half of this year, so expectations that would have been it would be full year expectations with last year.
Got it.
Okay.
Thanks for that and then just talking about.
The general temperature for pricing and well intervention.
We have seen.
To sort of maybe over simplify a little bit trough day rates for.
Deepwater rigs.
A low $200000 a day now back up to 300 300, plus thousand dollars a day.
Are you witnessing are similar.
Amplitude of cyclicality and improvement for your fleets vessel improvements as we move off of the floor and into what Youre bidding and security for work next year.
Hi, Scott.
We are seeing an increased rate environment last year, we were in the.
The high one hundreds and this year, we're heading up into the three hundreds in the fourth quarter higher than the mid two hundreds.
Part of it yet we have got some contracts.
That we're holding to that we signed up at the end of last year that are holding us back a little bit, but we're definitely seeing increased rates in all regions.
I will say that the REIT market in the North sea is a little bit different.
Vessel was a different mix in the north sea, United Diagnostics and light loans of engine assets, but our rates are holding in the north sea to sort of just below pre COVID-19 levels. So we're seeing an increased rate environment across all regions and in the robotics side of the business as well.
Okay.
So I mean, it just strikes me that based on your age two run rate.
EBITDA, you've got a lot more.
Pricing improvement across the fleet that will that will then layer on top of that as we go from second half of this year into next year.
That's a fair statement yes.
Okay.
Thank you very much I'll pass it over.
Eric and I have said, we still have some gaps to fill in Q4, but there's visibility to that as.
As well.
Got it.
Got it thank you.
Thank you. Our next question comes from the line of James Schumm with Cowen. Please proceed with your question.
Thanks, Good morning, guys.
I was wondering if you could help me think about the Siem helix one.
Over the next couple of quarters should we expect a loss in Q2, either on if you want to speak to gross profit or EBITDA should we expect a loss on the accommodations work in Q2, followed by another small loss in Q3.
As you undergo maintenance does that.
And one way to think about it.
So Jim this is Eric I think the right way to think about it is that that vessel will be generating losses.
Until we start well intervention again, which right now is targeting the fourth quarter at that time, we should slip into to generating positive cash.
Right now I think that our cost structure is pretty much set so really any variability would be any additional revenue that we can generate.
And so the combination is obviously as we said a very low revenue opportunities.
We're still going to be incurring costs as we do the maintenance or that you could say the mobilization.
For the.
For the tried at work.
In Q4, so I don't see right now any material differences between the expected loss in Q2 and Q3.
On that vessel.
Okay. Thanks, Eric.
Should we.
Should we assume that the work for Trident begins like mid November is that what you guys are thinking or what's the timeline there.
So Scott.
August date, mobilize them shouldnt window that narrows down the target date is the start of the quarter, but we have to be mindful of some long lead items that manufacturing has to produce that target is it early in the quarter.
And then it's a two year contract.
Rates are positive in positive EBIT generation in the first year they improve in the second year and there is options for multi year work.
And in fact try to have up to seven to nine years of P&I activity in Brazil. So we're quite confident we're in a good place for that vessel aspects useful.
Okay, great. Thank you Scott.
And then just wondering if theres anything you can say about I know there is.
The variability, which you talked about but any expectations for free cash this year or any parameters you can set or any color there. Thanks.
So Jim obviously, we disclosed what our capex expectations start for the year.
45% to $55 million range I think based on our scheduled.
<unk> debt profile now what our interest payments are going to be so that's really what we have to cover with our EBITDA.
Which shows that this year can be a challenge and then of course the.
Working capital fluctuations that can be created by a mobilization to the APAC region are obviously, a big variable there.
And so that's why to certain extent now.
Not providing guidance in that area, but there are some big ticket items that you could you could pencil in.
<unk> tried to work the potential ranges for free cash flow.
Okay. Thanks, Eric.
Our next question.
Comes from the line of Don Crist with Johnson Rice. Please proceed with your question.
Good morning, guys.
I just wanted to touch on.
The.
The re certifications that you had in the first quarter, obviously, you hedge your cost up a little bit should we expect cost.
To come down a little bit in the second quarter since all that maintenance is now behind us closer to that 125, or so million dollars run rate.
I would say done minus.
Actual expectations I think that.
A lot of the costs that flowed through our.
Our P&L in the first quarter.
Related to operations.
Our expectations that as we ramp up activity, our cost may actually increase as our revenue increases as well.
Ill gladly follow up afterwards on that one, but I don't think theres any significant decreases in costs that we are expect but we will follow that follow up with that one.
Okay.
And just on the P&A work.
<unk> that the.
Michelle multiyear contract that you signed in the Gulf of Mexico was related at least somewhat towards PMA work can you talk just in generally.
About <unk>.
Gulf of Mexico, P&A work I know theres been some bankruptcies recently over the last couple of years and that P&A work has been pushed back to other.
To operators that probably don't want it on their books anymore can you just talk about the environment and when do you think that kind of timing may materialize over the next several years.
Darren I'll take the first part of it I think the contract that we announced in the Gulf of Mexico with shell as deepwater deepwater work and that includes both the Po.
<unk> combination of PMA and.
<unk>.
Well intervention production enhancement, so I think thats. The recent contract that we announced there and of course, we do the work that we do with <unk>.
With our Kenyan group.
As far as our recent contracts as far as the market goes I think obviously watching very closely the developments there, but I'll pass on to OLED to talk more about what we see in that market.
Alright, Thank you sort of bifurcate the market right now between deep and shallow.
The deep market is probably increasing as a result of greater regulatory pressure on producers.
Especially since they are very profitable now to start catching up and get ahead on the P&A work.
Producers are also interested in reducing the ROE target on their balance sheet, but thats. The deep side. So that's I would call that a modestly improving increasing market.
And then on the shelf side as you mentioned there you've had significant bankruptcy.
A lot of properties that flowing back to the legacy owners. There is a lot of consternation in the market and a lot of discussion as to exactly how and when all of that gets cleaned up with a big emphasis from the regulatory bodies and.
And then just sort of the legacy owners to this cleaned up.
To that extent I think there is going to be a big uptick in the shelf decommissioning market and.
And Thats, where I alluded to in my comments, we're exploring several opportunities for how we would best participate in that and expand our capabilities beyond the to be able to be a meaningful player on the shelf as well.
Okay.
All the color I'll turn it back thanks.
As a reminder to register for a question has the one four.
Our next question comes from the line of Samantha Hoh with Evercore ICI. Please proceed with your question.
Hey, guys. Thanks for taking my questions.
Maybe <unk> 12 in Q3 like business model that you outlined.
Specifically, how do you view the mix between new screen longer term.
Is it going to be about equal parts.
So we like Steve highlighted like you. Thank you.
Thank you Shannon.
Dominique.
No.
That's a good question right now on the intervention side or mix between.
Maximizing remaining reserves abandoned lenses, it's about 50 50.
I think we'll be seeing greater.
Growth rate on the PMA side.
But then on the maximizing the reserves I think there will come a time in the market where more drosky events are possible. So that would mean that that would play catch up when that occurred so those two will be about even.
The wind segment and it's harder to.
Perfect.
As I said I think we're going to be open to opportunities, but we're going to be selective and look to provide specialty support services.
To that extent I can't really guess on what the timing would be when those opportunities present themselves, but we're going to be taking a sort of a longer term more prudent approach to growing the wind side.
Okay great.
Shallow water.
Capability.
Absolutely.
No.
And I'm just kind of wondering if yes.
Yes.
Paul.
Pat.
Sure Paul.
And it seemed like that gross capex going towards building up your shallow water capability.
Depending on.
The outcome of the opportunities we're looking at.
It requires some capital.
Okay.
And then lastly, I just wanted to take a little bit in chinas ability to debase Jamie.
Thanks Keith.
And I'm, just kind of wondering the conversations youre having.
As the customer buying loans without Lauren.
<unk>.
Compiling that proportional.
Platform Holocaust.
And then one real quick.
Carmichael.
You are having with your customers.
Are you for pinnacle.
Well, we've said that we are seeing an increased day rates.
Rates have increased significantly from 2021 scenario improving as we go forward, we'd like to stabilize rig rates and we're not going to be right behind rig rates and we often different contracting mechanisms.
Our clients are accepting that there is an increase in our costs and therefore, there is an increasing.
Our rights to the clients and it's being well received.
That's correct.
That's great. Thank you.
Thank you.
As a reminder to register for a question and pass the one four.
Our next question comes from the line of James Schumm with Cowen. Please proceed with your question.
Hey, Thanks for taking my last question here.
What would you guys need to see to begin a share repurchase program and what do you think would be a reasonable timeframe for that.
What we would need to see as a sustainable meaningful free cash flow generation.
And I think.
Are you better able to give you a timing for that going into 'twenty three.
Because at that point I would expect us to be meaningfully free cash flow positive.
Okay. Thank you very much.
As a reminder to register for a question press the one four.
There are no further questions at this time.
Okay. Thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our second quarter 2022 call in July Thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your line.
Okay.
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