Q4 2022 Helix Energy Solutions Group Inc Earnings Call

Okay.

Okay.

Greetings and welcome to the fourth quarter Helix Energy Solutions 2022 earnings conference call. During the presentation. All participants will be no listen only mode. Afterwards, we will conduct a question and answer session at that time, if you have a.

Chen Please press the one followed by the four on your telephone.

If at any time during the conference you need to reach an operator, Please press star zero.

As a reminder, this conference is being recorded Tuesday February 21st 2023.

I would now like to turn the conference over to Brett I Rioja, Chief Accounting Officer. Please go ahead.

Hi, good morning good.

Good morning, everyone and thanks for joining us today on our conference call for our fourth quarter and full year 2022 earnings release.

Participating on this call for helix today are Owen Kratz, our CEO Scotty Sparks, our CMO, Eric <unk> our CFO .

C&I Kirk our general counsel and myself.

Hopefully you've had an opportunity to review our earnings press release and the related slide presentation released last night.

If you did not have a copy of these materials both can be accessed Judy 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 deny Kirk 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 and assumptions as of today such forward looking statements may include projections and estimates of future events business or industry trends or business or financial results. All statements in this conference call or in the associated presentation other than statements of historical.

Facts are forward looking statements that are made under the safe Harbor provisions of the private Securities Litigation Reform Act of I 95 corridor.

Actual future results may differ materially from our projections and forward looking statements due to a number and variety of risks uncertainties assumptions and factors, including those set forth in slide two and our most recently filed annual report on Form 10-K, our quarterly reports on Form 10-Q and in our other filings with the SEC.

Should not place undue reliance on forward looking statements and we do not undertake any duty to update any forward looking statements. We disclaim any written or oral statements made by any third party regarding the subject matter of this conference call 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.

The 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.

Remember the information on this conference call speaks only as of today February 21, 2023, and therefore, you are advised that any time sensitive information may no longer be accurate as of any replay of this call.

Thanks Kim.

Good morning, everyone. We hope everyone out there and their families are doing well.

This morning, we will review, our Q4 and full year results performance and operations will provide our outlook for the market. Both what we currently are experiencing as well as our expectations beyond that and we'll provide our guidance for 2023.

Moving to the presentation slides six through nine provide a high level summary of our results and key highlights for the fourth quarter and full year 2022.

During the fourth quarter activity levels across all segments were high with the increased activity from the strong global offshore energy markets driving improved rates highlights for the quarter include completion of our West Africa, well intervention campaign strong activity and utilization in the Gulf of Mexico. The U S. H one.

Commenced its well decommissioning project for Trident in Brazil, a resilient north seawell intervention market driving utilization robotics in helix alliance vote, providing solid seasonal adjusted contribution or.

Our production facilities segment continues to be a steady performer.

Our acquisition of three trenching systems and are interesting to IRS systems and to strategically deploy in the emerging markets.

And on the sales front, we were awarded a minimum 12 months well decommissioning contract for the Q 7000 offshore, Brazil with shell and we secured an extension of the HP one through at least mid 2024.

Revenues for the quarter were $288 million, an increase of 15 million over our third quarter results. Our net income was $3 million or $22 million improvement over Q3.

Adjusted EBITDA for the quarter was $49 million.

Our fourth quarter results were stronger than forecast driven by the Q 7000, working into December in West Africa, and the robust north seawell intervention market activity for.

For the full year 2022 revenues improved by 198 million to 873 million, our gross profit improved by 36 million to $51 million.

Net loss increased by 26 million to $88 million impacted by $23 million of FX loss from the devaluation of the British pound.

EBITDA increased to $121 million in 2022 from $96 million in 2021.

Operating cash flow for the year was 51 million group, resulting in free cash flow of $18 million.

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We caution.

At the beginning of the year that 2022 would be a transition year for helix. Our expectation was that the challenges of a multi year weak market would transition into a much improved market for the second half of 2022.

As we currently see it the fundamental improvements in the offshore market, both domestically and internationally have established the foundation for a multi year recovery of activity.

We're the market recovery, taking shape, we acquired alliance last summer to position helix has a full field abandonment service provider expanding our off expanding our offerings in markets and diversifying our revenue stream.

This acquisition added shallow water marine surfaces surface, well, P&A and intervention services diving and facility and pipeline removal capabilities to our existing services.

With this acquisition and the offshore market improvements, we continue to execute our strategy of becoming the preeminent offshore energy transmission company.

I'd like to thank our employees, including the new team members that helix alliance for their efforts and high level of execution in 2020 to.

Executing safe and efficient operations for our customers has always been our hallmark and our goal is to remain an established leader in our industry.

On to slide 10.

From a balance sheet perspective, our cash balance at the end of the quarter was $187 million.

During the quarter, our operating cash flow was $50 million, including $5 million of Drydock and recertification costs.

In Q4, we spent 29 million on capex, resulting in $21 million and free cash flow.

At year end, we were in a net debt position of $75 million during the quarter, we optimistically or Opportunistically acquired two additional IRS systems and three trenching assets as.

As the global offshore wind market continues to grow and expand its footprint, we strategically acquired the <unk> to address the developing markets in the APAC and the U S East coast.

The additional IRS systems are intended to allow us to target strategic opportunities globally.

I'd like to highlight yesterday's announcement that our board of directors authorized a share buyback program for the repurchase of up to $200 million of our outstanding shares.

We've long communicated our design desire to return capital to the shareholders and field the strength would be offshore market. The company outlook for 2023 and beyond and a solid balance sheet has put us in a position to announce this program.

As always we will balance the need to manage and fund our operations.

<unk> spending, including alliance Arnelle maturing debt strategic investment opportunities along with the share repurchase program.

We plan to generally align this program with our cash flow generation and initially target deploying 25% of our free cash flow, noting the seasonality of our business.

We're proud we're proud to be in a position to announcements repurchase program, which we view as an excellent opportunity to return value to our shareholders I will now turn the call over to Scotty for an in depth discussion of our operating.

Good morning, everyone moving on to slide 12, Firstly I would like to thank our teams offshore and onshore for another well executed quarter and finishing the year with the continued exceptionally high standards.

Market conditions continued to increase and we can create a 2022 better than forecasted with high utilization across the fleet carrying forward, we have a much stronger backlog than we've had in recent years and very good visibility for the next few years.

Our outlook for 2023, a significant increase year over year with some long term contracts in place with a high number of contracted days of work for a spot market assets whether.

All of our businesses are well positioned for 2023 and beyond.

In the fourth quarter of 2022, we continue to operate globally with minimal operational disruption with operations in Europe , West Africa Asia, Brazil, the Gulf of Mexico, and the U S. East Coast, we continue to operate at high spend its startups on efficiency for the quarter.

During the fourth quarter, we produced revenues of $288 million, resulting in a gross profit margin of 11% generic to the gross profits of $31 million for Jason EBIT for the quarter of $49 million, a significant improvement against the fourth quarter of 2021.

Year ended with EBIT of $121 million compared to $96 million of 2021.

During the fourth quarter, and well intervention fleet achieved utilization of 97% globally with 97% utilization in the Gulf of Mexico, 92% in Brazil 19, 9%.

The 100% utilization in West Africa, including key 7000, competing works in Nigeria, and commencing its patrons at for the APAC region.

The Robotics Division chartered vessel fleet achieved high utilization of 96% in the quarter operating four vessels with a 332 days.

Between RV support trenching renewable works globally, and we're gonna multiple enable us projects in Europe , and U S East coast.

Helix Alliance Pizza vessels achieved 69% utilization for our live sites.

The alliance PMA systems achieved 80% utilization with 1106 operational days working for numerous clients in the Gulf of Mexico.

The free diving support assets achieved 63% utilization in the heavy lift barge with seasonally warm stacked as expected.

Slide 13 provides a more detailed review about whether intervention business in the Gulf of Mexico.

The key 5000 again had strong utilization of 100% in the fourth quarter performing production enhancement work on four wells and ultra deepwater where can under a multiyear campaign for shell.

The key for that increased utilization of 94% in the fourth quarter compared to utilization of 81% in the third quarter.

The vessel completed the seawell production enhancement scopes for one customer further by a single well development for another customer and then succeed.

Well production enhancement campaign for another client in ultra deepwater.

Positively we expect both vessels will have high utilization with a high number of contracted days in 2023, and good visibility of potential further activity with steadily increasing rates.

Thanks, Keith vessels continue to operate under the integrated feed excessively subsea services Alliance package.

Moving on to slide 14.

Our north Seawell intervention business had a very strong quarter, considering the seasonal winter months with solid utilization for both vessels in the U K. The key 7000 concluded another campaign in West Africa price, Thanks niche type trends to the APAC region.

The well enhancer performed very well and achieved 100% utilization in Q4 compared to 80% utilization in Q3, the vessels perform production enhancement works on five wells for key customers.

The seawell had a good quarter with 97% utilization divestment perform decommissioning works on numerous wireless for several customers also utilizing our diving services.

The North Sea market continues to increase and our business has seen much improved utilization achieving higher rates.

<unk> has a full year and has recently contracted a 180 day decommissioning projects in the Mediterranean expected to commence at the end of Q3 slightly until the end of Q1 of 2024 and the well enhancer is contracted for nearly all of 2023.

Typically we would seasonally expect the vessels in the winter months in the North Sea. However, this winter we are planning to continue working through the current winter months that this timeframe to be where contributor next winter with a short planned maintenance periods for each vessel.

The key 7000 was 100% utilized in Q4 working in Nigeria undertaking production enhancement works for an existing clients until December .

So the increments the patrons of the APAC region to undertake a dry dock that commenced in early February .

Upon completion the vessel as a franchise that has any reason to commence a contract to dwell abandonment campaign.

But thats the same schedule to carry out the pay change it to Australia to undertake a lift in the second half of 2023.

For our seven well abandonment campaign for Cooper Energy and then a further two wells for another clients covering most of 2023.

The key 7000 is then contracted for 12 months for an early 2020 for abandonment work with shell in Brazil.

So the key seven thousands now contracted until early 2025, and we have already visibility I'll follow anywhere from 2000 2025.

Also in Australia, and one of our recently acquired 10-K IRS systems has been on an 18 month contract commenced in February of 2023.

Moving onto slide 15.

In Brazil, we had good utilization of 92% in the fourth quarter.

The Siem helix, one was 87% utilized in Q4 and lets take an RV survey work for <unk> and then commence the <unk> decommissioning project <unk> performing work on three wells in the quarter.

The Siem helix two had a strong quarter with 98% utilization completion production enhancement work on three wells and decommissioning activity on three wells the two.

Year contract extensions with Petrobras for the Siem helix two commenced in December with a substantial rate increase.

In the fourth quarter again, when the Petrobras rig contracts of the year Award. We have now won this award three times with each year that we've been eligible for the award we are very pleased with this broad based on our safety performance.

Bachelor issue and a big thanks to our Brazil team and the curious SHT.

We expect 2023 is going to be a far better year for us in Brazil with type vessels being back to well intervention rates. We are pleased with both vessels once again secured into long term contracts in place that we are scheduled to have free vessels contracted in the Brazilian region in 2024 with the addition of the key 7000 shell contract.

Slide 16 provides details of our own fleet.

Utilization.

Moving on to slide 17 for our robotic surgery.

Robotics continues their strong performance and had another good quarter.

And a very good year performing at high standards with strong utilization pricing for vessels greatly during the quarter, primarily working between trenching, RFP support <unk> and oil and gas and renewables related projects.

Yes.

In the APAC region, and the Grand Canyon. So you had 100% utilization in Q4, the vessel performed well in the long term decommissioning project in Thailand.

In February of 2023, one of the newly acquired <unk> 1400, Trenching systems commenced paid ship into Singapore stabilize turn and awarded renewables projects in Taiwan set to continue the global expansion of our renewable trenching services.

In the North Sea, the Grand Canyon, III, which utilize 100% undertaken renewables trenching operations with free clients performing extremely well and performed at oil and gas trenching projects with two clients.

He is the horizon <unk>.

Had 68 days of spot vessel utilization competes in renewables Trenching works one customer in the North Sea and then completion in oil and gas trenching scope for another customer.

The change in vessels in the North Sea has strong backlog for 2020 free trenching season, there is a mix of renewable and oil and gas trenching works.

In the USA the shade aboard alone Jones Act compliant vessel was utilized 91% in Q4.

The vessel performed the site client projects utilizing our own in house autograph supporting wind farm operations of the East Coast.

The vessel then performed <unk> in the Gulf of Mexico to support the seismic node installation project.

On the <unk> case, the recently acquired <unk> system has been contracted and localized on the client provided vessel to undertake site preparation for wind farm support again, extending our services that we offer to the renewable sector.

Felix Robotics has performed well this year and we have a good backlog visibility globally and tightening markets in both the oil and gas in the global renewables.

And we expect a strong performance in 2023 and beyond.

Slide 18 details our robotics vessels RV entrenching utilization.

Slide 19 provides an overview of our shallow water decommissioning and construction support service business Helix Alliance reported it as our shallow water abandonment segments.

Shallow water what tends to be seasonally affected in the winter months due to the west and winter weather conditions, leading to lower utilization and seasonal stocking for some of our assets in Q4.

The offshore division had tend to start production in Q4 with the combined utilization of 69% performing decommissioning services, such as well Abandonments and pipeline development offshore also supplied six rsp's in luxury boats with a combined utilization of 74%.

And key for the energy services Division at 1106 days of operations or 80% utilization for the 15 markets full P&I systems deployed conduct and decommissioning services.

The division had 141 days of operations or 26% utilization for the sixth co chief <unk> systems.

The diving in heavy lift divisions had combined 63% utilization across the three dive in assets and the heavy lift barge was as expected seasonally expect.

Over to slide 20, Slide 20 provides detail for the helix align special systems recently utilization.

Overall, we commenced 2022 I expect it to be a tough transition as the.

A market trend, we reacted well and I would again like to thank our helix employees and partners to producing the results since ending the year around far better than we had first forecasted again with strong operational efficiency minimal NPT and again set high standards for safety performance.

Our markets in a much increased for all of our businesses into strong utilization for our vessels and a stable platform for our employees for the next few years, we expect to be in a strong position with some well won long term contracts contracted high utilization for our surplus assets improving rates and generally better terms and conditions I'll now turn the call over to Brett.

<unk>.

Thanks Scott.

Moving to slide 22 outlines our debt instruments and their maturity profile as of December 31.

Total funded debt was $271 million at the end of the year.

During 2023, we have semiannual installments on the mirror that in addition to the maturity of the remaining $30 million of our 2023 convertibles.

Moving on to slide 23.

Provided an update on key balance sheet metrics, including cash liquidity long term debt and net debt levels at year end.

With cash of 187 million, our net debt position was $75 million at.

At year end.

Under our $100 million ABL facility, we had no borrowings outstanding and $98 million of availability with the resulting liquidity of $285 million.

Slide 24 presents our five year performance.

We are happy to report our fifth straight year of positive free cash flow in 2020, despite being a period that included two years completing our significant capital expansion phase in 18, and 19 and the COVID-19 market disruptions in 2020 and 2021.

Slide 25 shows different compositions of our revenues.

This segment and geography charts highlight our diversification into shallow water decommissioning in 2022.

And geographically into West Africa in 2020.

We also present 2022 revenues by the three components of our energy transition strategy.

During 2022, approximately 10% of our revenues came from renewables wind farm work.

And 35% from decommissioning and Wi subsea wells and infrastructure.

Production maximization, a core market for well intervention has been bolstered by the global demand for energy security.

I will now turn the call over to Erik for a discussion on our outlook for 2023 and beyond.

Thanks Brent.

As you've heard we expect to continue the momentum from the second half of 2022 into 2023.

Based on the strength of the offshore market and our contracted work we are providing the following 2023 guidance in certain key financial metrics from our forecast, we expect revenue to be between one <unk> and $1 2 billion for 'twenty three with EBITDA in the range of 210 to 250.

We expect to generate free cash flow between $110 million to $150 million and our capital spend to be between $50 million to $70 million.

These ranges include some key assumptions and estimates any significant variation from these assumptions and estimates could cause our results to fall outside of the ranges provided.

Our quarterly results are likely to continue to be impacted by seasonal weather in the north sea and Gulf of Mexico shelf, primarily in the first quarter and fourth quarter. In addition, the timing of our vessel maintenance periods and project mobilizations will cause variances between quarters.

<unk>, we expect the second half of 'twenty three to be stronger than the first half with the third quarter likely to be our strongest quarter.

Providing our key assumptions by segment and region started starting on slide 28.

First with our well intervention segment.

Gulf of Mexico is expected to continue to be a very strong market with improving rates and expected strong utilization on our Q4 thousand to 5000.

Contracted work expense into Q3.

5000 is anticipated to have an approximate 35 day maintenance period in Q1.

Q4 has a scheduled dry dock of approximately 75 days starting at the end of Q1.

In the UK North sea both vessels have contracted work into Q4, we pursue will have and work into Q1 of 2024.

Both vessels completed short maintenance period in Q1.

Since mid 2022, the activity levels in the North Seawell intervention market has significantly increased with limited seasonal impact in 2022 and minimal impact expected in 2020.

The Q 7000 started its transit to APAC region in mid December the vessels currently in dry dock in Malaysia. Upon completion of the dry dock. The vessel is set to resume its pay transit to New Zealand. We can project scheduled to start in mid Q2.

<unk> has contracted work and the APAC region into Q4.

In Brazil, the Siem helix two has contracted into mid December 'twenty, four with Petrobras. The Siem helix, one is contracted performing well abandonment work.

Into Q4 of 2024.

Moving onto our robotics segment Slide 29, robotic segment is benefiting from a tight market, where both the oil and gas market in the renewables market are extremely active competing for assets in the APAC region. The Grand Canyon II is contracted to perform decommissioning and <unk> support work in Thailand into.

The second half of 2023 with expected good utilization for the balance of 'twenty three in that region. In addition, one of the recently acquired <unk> hundred <unk> is being deployed to the region for work expected in Q2 Q3.

In the North Sea the Grand Canyon III is contracted to perform trenching work with expected strong utilization for 'twenty three the horizon enabler with its flexible charter has trenching projects in Q2 and Q3.

The glow more way recently chartered for site clearance and <unk> global is forecasted to have good utilization.

In the U S, especially aboard liners working the Gulf of Mexico portfolio <unk>, serving support with.

With opportunities in the Gulf of Mexico, and the U S East coast. The vessel is expected to have strong utilization.

The recently acquired <unk>.

Filings being deployed for short project on the East Coast.

Moving to prevent production facilities for <unk>.

One is on contract for the balance of 'twenty three with no expected change.

We have expected variability production has been Droshky field continues to deplete, we should benefit from the Thunder Hawk acquisition, although the producing facility has at least two expected outages for maintenance in 2023 with compressed extended period here in Q1.

Continuing on to slide 34, our new shallow water development segment with the acquisition of <unk> clients in July 22 in 2023, we should benefit.

Benefit from a full year of helix clients.

This shelf decommissioning market continues to be extremely active we expect the marine offshore division to maintain digitization on 8% to 10 lift boats with some variable seasonality on the OSP and crude book the.

<unk> Energy services Division should have strong utilization for 12 to 15, PMA spreads and want to bring coiled tubing units throughout 'twenty three.

There is seasonality in the diving in heavy lift where the epic Kedron is currently idled with limited near term opportunities.

We do expect the massive season during the second and third quarter.

Moving on to slide 31.

Our capex forecast for 2003.

Heavily impacted by the Drydocks and maintenance period on our key vessels. The Q4, <unk> 5000 <unk> 7000.

All have scheduled maintenance periods early 'twenty three with the heavy regulatory year and the inclusion of huge clients. Our capex range for 'twenty. Three is currently $50 million to $70 million with a significant amount expected in the first half of the year.

The majority of our Capex continues to to be maintenance and project related related which primarily falls in our operating cash flows.

Reviewing our balance sheet funded debt of 271 at December 31 is expected to decrease by $38 million in 2023 with the scheduled principal payments.

I'll skip the remaining slides starting with slide two amendment for Ya.

Okay.

On the call back to Owen for a discussion on our outlook beyond 'twenty three year for closing comments.

Alright, Thanks, Eric and what a difference a year makes.

Last year at this time, we did not have the visibility end of the market.

Excuse me, we didn't have visibility into the market uncertainties.

Allow us to provide an informed guidance.

Today, we now have the best visibility for the foreseeable future that we've had in years.

<unk> began to increase following the Ukraine invasion, and realization that energy security working with central component of the energy transition.

We did face challenges going into 2022 with uncertain demand long term contracts rolling off from a low rate environment.

Each one and let's say, it's two negatively impacted EBITDA contributions and our 2022 results.

2022 headwinds were offset in part by growth from robotics, and the rest of our well intervention business.

The Q 5000 achieved over 90% utilization for 2022 without being available for a single day of BP work under the new three year call off contract.

For 2023 rates.

Rates have increased and are expected to increase further we experienced and we expect to.

And that's H two impact to reverse by approximately $50 million.

In addition, going into 2022, we tendered rates now considered below market rates and these and thus these commitments roll off it sets up a further upside in 'twenty four and 'twenty five.

Beyond the there are a few representative positive market trends worth mentioning that bodes well for helix.

The U K North Sea has returned to being a full year market in 2023 versus the seasonality of recent years that led to our practices.

Stacking the vessels located in that region for two to four months during the winter. This is a large gain in utilization of on top of escalating rates.

The APAC market continues to grow some outlooks cohorts eventually surpassing even the EU market for offshore wind development and we now have returned to her along with our vessels and rovs to address that market, while the east coast market has yet to fully take offer walkthrough. When we now have retrenched or a site clearance boulder.

<unk> and access to vessels to address that market as it grows further.

In Brazil, the divestiture properties by Petrobras has brought additional players through the market.

We now have contracts with three producers, providing a much more diversified customer base, which should lead to Brazil being a three vessel market for helix in 2024.

Brazil is also becoming a decommissioning market for both deep and shelf decommissioning of fields, while still being a prolific producing region.

That has implications for our recent entry into being a significant deepwater and shelf abandonment contractor.

Australia is also developing into a strong decommissioning market as evidenced by the work we secured for the Q 7000 for 2023 prior to transitioning Brazil.

After successfully conducting operations in West Africa.

<unk> for our services continues to grow with the relocation of the June $7000, Australia in 2023, we're assessing our options for West Africa.

We have multi regional offer optionality and pricing leverage going forward.

Our well intervention assets are virtually sold out and we have a strong outlook for robotics in 2023, we did recently added two additional jet trencher, the iron cloud trenching system and our interest in two additional intervention systems. A second Boulder grab was also added total targets.

U S East Coast Wind farm market.

Cloud Trenching system went on contract immediately the first venture is committed under an LOI and one of the intervention systems is contracted for 2023.

This pattern for adding incremental capacity to our existing core businesses may continue where we see sustainable demand and strong returns, but we still have no plans for any significant growth capital spending.

We did make a significant acquisition of alliance in the Gulf of Mexico that extends our decommissioning business into the shallow water shelf decommissioning market. Our initial guidance for EBITDA contribution from alliance was $30 million to $40 million annually.

For the second half of 2022 alone since the acquisition Helix Alliance generated $30 million.

We see multiyear demand for shallow water shelf decommissioning and helix alliances positioned to be the lead leading contractor in that space.

The takeaway.

Is that we see multi year strong demand for all helix capabilities.

We've made become asset short and meeting all the demand, but our strategy will be to look toward maintaining capital spending discipline and focus on free cash flow generation.

It's our current intent to build the necessary cash to be in a positive position to cash settle all of our outstanding debt commitments.

We'll continue to evaluate the appropriate level of debt to be included in our capital structure, depending on the status of the debt market in the future.

We will likely reserve a portion of free cash flow for smaller incremental additions through our capabilities and our current niches with the remainder of the free cash flow generation is discretionary.

To that end the board has approved a 200 million share repurchase plan, representing approximately 17% of our current market value. We envisioned a target of approximately 25% of our free cash flow allocated to share repurchases and that we were generally aligned the timing of our repurchases with.

Our cash flow generation.

And does free cash flow grows the amount of share repurchases could grow in the 25% allocation may also be increase.

This was a significant significant announcement in our country and our company's story.

We've long communicated to investors and we look forward to deploying capital to execute on the program and return value to our shareholders.

We see demand continuing to build for the three legs of our business model maximizing our remaining reserves decommissioning oil and gas fields and supporting wind farm development.

Our well intervention assets are predicted to be fully utilized and naturally hedged between maximizing remaining reserves and decommissioning, depending on commodity price and political wins.

Both are mature end of life oil and gas activities.

The robotics group primarily support.

Well intervention group, but also has focused on maintaining our strong position in offshore wind farm work for trenching as well as site preparation work or.

Overall following a number of challenging years, we believe we've positioned ourselves well, we expect to have a strong multiyear periods of free cash flow generation ahead Eric.

Thanks Alan.

At this time, we'll take any questions.

Thank you if you'd like to register a question. Please press the one followed by the four on your telephone.

Sweet Tom Crumb to acknowledge your request. If your question has been answered and you would like to try a registration. Please press. The one followed by this week once again, it's one four if you would like to register for a question.

And our first question comes from Sharif Ahmad.

Rabbie with B P I G.

You May proceed with your question.

Good morning, Thanks for taking my question I wanted to ask about.

Excuse me what opportunities exist for the 15, K, well well intervention stacks and how do you see demand trending for them this year.

So that did not take that Scotty here, we do see demand from 15 K system. It will periodically be deployed off the key four thousands.

This works for at least two clients and obviously, we're also getting some of the work towards the end of the asset I'd expect the 16 K systems have suddenly utilization in 2000 treated as they had in 2018.

Thanks, and you talked about visibility for the well intervention vessels on contracted days in the back half of the year and then further upside next year. So is there any difference between basins regarding how far out you can gauge long term interest for example, Brazil seems to have pretty good visibility because.

We know we've got three vessels working already contracted next year.

I would say we have good visibility across all three regions.

We've never had it's been a long time since we haven't had to stack the vessels in the North Sea region for instance, and we've got good visibility in that region going out to 2024 and already have contracted work.

And then the Gulf of Mexico, we see good visibility we have some days left to sell at the backend of the year, but quite comfortable with the amount of client.

Inquiries, we have that we would take those days out and keep increasing the rates and like you say facilities that can get Australia has already picked up so.

That visibility is good as the best we've seen in a long time.

Thanks very much.

Thank you.

Our next question comes from James Schumm with Cowen You May proceed with your question.

Thanks, and good morning, everyone.

If I look at the guidance just looking at the revenue guidance for the shallow water abandonment and then I'll just take the midpoint it looks like youre expecting revenues to be lower than 23 versus 2022.

What's driving that.

Yes, Jim as we as we develop our outlook, we really focus on are you could say our revenue generating margin generating.

Capabilities.

There is variability with some of the pass through items.

And that either no margin or very low margin and because of the variability of that we don't.

Really forecast those were budget films. So so overall to the extent they come in similar to the rate of 22, our revenues and our costs would probably be higher in that in that segment.

Okay, and maybe I should ask thanks, Eric maybe I should have asked.

What about on the profitability I mean, what are you expecting there on an EBITDA level is that.

Are you expecting a similar year are you expecting improvement what are you seeing there.

So I think from our standpoint, we do expect a very similar year to what we experienced obviously.

Like we said there is seasonality and I think youll see that in the first and fourth quarter results, but we do expect a very active second and third quarter.

Okay. Thanks.

And then just curious.

What the trajectory of the P&A work.

Our activity is in the Gulf of Mexico, and globally, just curious if youre seeing an acceleration in either region.

I'll have to take that.

Go by region and the UK.

But year ago, it was a real strong push towards PMA.

With the energy crisis in Ukraine that sort of shifted back to production enhancement.

The UK government also imposed.

Gross profit tax were decommissioning expenses not deductible.

It's had the effect of cooling the demand for <unk> in the near term.

I'll keep that returning probably in 'twenty four 'twenty five time period.

Depending on geopolitical events.

Sure.

The North Sea there is a huge backlog of work, though that needs to be done and I think there's a social will.

The U K to see that start commencing.

The.

Let me sit through Australia, Australia.

Is that a market is a mature market with a lot of deals that are nearing commercial and group life.

Recently had a bankruptcy in Australia, where the property reverted back to the government in fab two.

In fact, we're going down to work for the New Zealand government on removing one of those fields.

As a result, I think the regulatory bodies down there become much more aggressive on pushing for a catch up on the backlog of abandonment work. So Australia for the next few years, so I see that as being a strong and growing market for decommissioning.

In the Gulf of Mexico, its pretty status quo.

Oh.

In the deepwater.

Self though.

It has seen a tremendous surge in decommissioning activity as a result of <unk> bankruptcy.

All of the shelf properties reverted back to the successor owners and the successor owners.

Our predominantly the majors and they just want to get these things gone.

Out of the out of the way so that's driving a big boom plus the regulators don't want us to.

A recurrence of this so they are pushing for other operators to start to catch up on the backlog there as well and then finally in Brazil.

The Brazil shelf market I think is going to be an interesting one developing there's also interest from the regulatory bodies down there to not let it get out of control and to start seeing the shelf decommissioning performed and then addition to that Petrobras.

<unk> packages to some of the new players down there.

<unk> included a commitment to perform a certain amount of PMA within a certain period of time, so that's driving a multiyear surge in decommissioning in Brazil. So.

Globally.

Especially fuelled by the energy transition push away from oil and gas.

Big.

I hate to say it but the.

The perpetual hockey stick of.

<unk> DNA may actually come to pass here.

Okay, great. Thanks for thanks for all the color I'll turn it back.

Our next question comes from Don Crist with Johnson Rice you May proceed with your question.

Good morning, gentlemen.

I had a question on the 'twenty six notes I know they're there.

Come in close to a potential conversion price there and.

Historically, you have talked about trying to settle those in cash in and keeping enough cash on the balance sheet to do that.

Is that still the plan number one and number two how does the <unk>.

Share buyback plan to that would you use the share buyback to combat any potential dilution from from the 'twenty six notes conversion.

So I think overall, our general plan is to obviously execute the share buyback.

The convertible notes and 26 are they do mature in February of 2006.

The earliest that call provision that we would have.

It would be later on this year.

I think overall you're right.

General thought process or is that we would.

<unk>.

In cash I think we're going to keep our options open depending on what the overall.

Debt markets look like I think if there is an option that would probably steer us away from the convertible market that would be our preferred option at this time, but we're going to keep our options open.

To summarize our our intent right now because of the.

Conversion of the debt market is that we will be sort of squirreling away enough cash to be assured of cash settling these.

The second option would be if the debt markets are sufficient then we will look at some form of permanent debt in our capital structure.

But using shares from the repurchase plan here for settling the converts is not an option, but I would say is on the table.

Okay I appreciate that color and just just one further one for me.

There are additional opportunities for oil and gas assets in the Gulf of Mexico as it relates to the shallow water PMA market I know you've done a good job consolidating that and become a big player in that market are there additional assets out there that you target to bolster your position there.

There are additional assets I'd say right now.

Pending on which of the five asset classes you are talking about that are included and what's needed for abandonment.

We have anywhere from 20% to 35% of the available assets, where we don't have sufficient people to manage all of the assets we actually have.

The people constrained as the big bottleneck and Thats facing everybody.

So yes. There are there are additional assets out there there are additional consolidation opportunities.

We're going to have to solve for the people equation first.

I appreciate all the color.

Turn it back thank you.

Our next question comes from Samantha Hoh with Evercore ISI you May proceed with your question.

Hey, guys and congrats on a really great quarter.

I wanted to maybe talk a little bit more about the well intervention rate progression.

Yes.

A lot of information from sensors, how much better day rates are moving in Shanghai.

Sure.

In the right direction.

I was just wondering if you could talk maybe about how it compares to last cycle at previous cycles, and where do you think is there.

A ceiling for <unk>.

Move to over the next several years.

Good morning.

The rates have significantly improved over the last 12 months I would say that we're about 40% higher across the board from where we were a year ago.

We continue to push rates rig rates offshore keeps increasing in certain regions and thats. A date, we will continue to push our rates.

Also a shortage of our assets.

At this time, so we're continuing to increase rates.

Our customers have Intel.

<unk> on our proposals in NSA.

What rates will increase we will continue to push right now I don't see a ceiling.

A year ago rig rates was saying they were targeting 300000 of Dayton that targeting 400 plasma betas, even towards a 500000 basis.

I don't have a clear view on.

See you in right now.

Did you see that they are increasing across the board.

Okay, Great and then my other question is has to do with the robotics segment. It looks like there was a nice uptick there.

Renewables mix.

That's from last year.

Mentioned that there was a lot of competition for assets with the oil and gas.

I was just wondering if you see that mix, maybe reaching that 50%.

<unk> are even more pronounced renewables this year.

You mean.

<unk>.

R&D side for the segment.

So again, we see an increased marketing renewables is geographic expansion.

Just a quiet well free trenching systems, one of them has been deployed tri-city East coast when the Sky to Asia, and we stay in Asia for quite some time.

We are seeing an increased market in the north sea for renewables Trenching and site payments, we're seeing site clearance increase on the East Coast I think as I mentioned, the Asia market will eventually be a larger market than the.

In the.

And eventually those soon to start seeing decommissioning opportunity in renewables segment.

That's certainly an increased market.

Some of the older renewable wind farms are so much smaller now.

<unk>, so there'll be a play in the coming years for decommissioning and renewable resources.

In the shallow water.

Thank you so much and congrats again.

Thank you.

As a reminder, if you would like to read just a quick question. Please press the one followed by the four.

We have no further phone 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 first quarter 2023 call in April Thank you.

That does conclude the conference call for today, we thank you for your participation and we ask that you. Please disconnect your lines.

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